Practise separating private and external benefits in real contexts such as education, then linking benefits to social outcomes.
Emiliana Lucas owns a farm in Tanzania on which she grows sunflowers. In 2020 Tania, her neighbour, started a honey bee farm. The honey bees pollinated Emiliana's sunflowers. As a result, seed production on Emiliana's farm increased from 300kg in 2019 to 620kg in 2020.
With reference to the information provided, explain the difference between private benefits and external benefits.
Knowledge 2, Application 2
Quantitative skills assessed:
QS9: Interpret, apply and analyse information in written, graphical, tabular and numerical forms.
Knowledge
1 mark for understanding of 'private benefits'
- Private benefits are benefits/positive impacts on the buyer or seller/first/second party (1)
1 mark for understanding of 'external benefits'
- External benefits are benefits/positive impacts on third parties/positive spillovers/ MSB > MPB (1)
Application
1 mark for reference to private benefits in stem
- Benefits to her neighbour, Tania, of earning revenue through selling honey/
- Benefits to Emiliana of earning revenue through selling sunflower seeds (1)
1 mark for reference to external benefits in stem
- Emiliana's production increased from 300 kg of sunflower seeds to 620 kg of sunflower seeds/
- The honey bees help pollinate Emiliana's sunflowers increasing her output (1)
(4)