I have a question.
In a competitive market demand will always reflect all spillover benefits?
Or supply will always reflect all spillover costs?
Thanks!
Since this is not my area of expertise, I searched Google under the key words "spillover benefits costs demand" to get these possible sources:
http://www.oswego.edu/~spizman/chp17.html
http://minneapolisfed.org/econed/essay/topics/topic03.cfm
http://www.ces.ncsu.edu/resources/education/sd8/
http://66.102.7.104/search?q=cache:XXJOvSqcpw8J:www.class.csupomona.edu/ec/aebres/ec201/lecture12.doc+spillover+benefits+costs+demand&hl=en&gl=us&ct=clnk&cd=9&client=safari
http://66.102.7.104/search?q=cache:KUee-plqB0kJ:www.dfid.gov.uk/pubs/files/edcostanedpaper02.pdf+spillover+benefits+costs+demand&hl=en&gl=us&ct=clnk&cd=17&client=safari
Your search for answers might be aided by using the <Find> command for the key words.
I hope this helps. Thanks for asking.
The concept of spillover benefits and costs refers to the external or indirect impact of economic activities on individuals or groups who are not directly involved in the transaction.
In a competitive market, demand reflects the willingness and ability of consumers to pay for a product or service at a given price. However, demand does not always fully reflect all spillover benefits. Spillover benefits occur when there are positive external effects, such as the benefits that society receives from the consumption of a good or service.
For example, the installation of solar panels on a house may lead to reduced electricity bills for the homeowner, but it also has positive spillover benefits for the environment by reducing carbon emissions. These environmental benefits are not directly accounted for in the demand for solar panels and may not be fully reflected in the market price.
On the other hand, supply in a competitive market reflects the quantity of a good or service that producers are willing to offer at different prices. Supply does not always fully reflect all spillover costs. Spillover costs occur when there are negative external effects, such as the costs imposed on society by the production or consumption of a good or service.
For example, the production of a good that generates pollution may have a negative impact on the environment or public health. These costs are not directly accounted for in the supply of the good and may not be fully reflected in the market price.
In summary, in a competitive market, demand may not fully reflect all spillover benefits, and supply may not fully reflect all spillover costs. This is because spillover effects are externalities that are not internalized by the market participants. To account for these externalities, governments may implement regulations or taxes to internalize the costs or provide subsidies to encourage the provision of spillover benefits.