CAIE IGCSE Business Studies 6.2.3 external costs and benefits
Practise externality questions by defining third-party effects and applying costs or benefits to communities and businesses.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define externalities as third-party effects from production or consumption without compensation.
- Identify external benefits such as jobs, tax revenue or other businesses moving nearby.
- Apply external costs such as pollution, congestion or noise to the local community.
6.2.3—External costs and benefits question 1
[Maximum number: 2]
GAE is a multinational company. It manufactures steel. GAE has 2400 employees and has factories in 4 countries. The business regularly introduces new technology. Holding inventory is important. GAE's directors are planning to build a new factory and want to know how legal controls over location might affect this decision. The Managing Director said, 'The new factory will create many external benefits.'
Define 'external benefits'.
Award 2 marks for a full definition. Award 1 mark for a partial definition.
- Gains to the rest of society other than the business as a result of business activity [2]
Partial definition e.g.
- Gains to the rest of society / third party [1]
References to business activity is [+1] only.
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