Negative externalities in economics

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However, that deadweight loss area is being zeroed out by societal negative surplus anyway - it never counted. That is the surplus area lost when we shift equilibrium left from 3.5 to 1.5.

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Therefore, the deadweight loss area is the part between the green and purple lines, from Q=1.5 and Q=3.5. Then there's some 'surviving' societal negative surplus to the right which is the purple triangle. The area with the vertical yellow lines is the only producer surplus that 'survives' - the rest is zeroed out by the societal negative surplus. The part that he shaded with slanted white stripes is societal negative surplus being zeroed out by positive consumer and producer surpluses. The total societal negative surplus area is the area between the white supply curve and the green supply curve, from Q=0 to Q=3.5. When he filled in the purple 'triangle' he sort of glossed over that point, but the purple area is the 'societal negative surplus' that's not being balanced out by a consumer surplus or producer surplus.

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