Answer to Question #89112 in Microeconomics for jacob

Question

Which would be a potential negative externality of a new miracle cure for the flu that consumers can purchase?

Answer 1

The potential negative externality of a new miracle cure for the flu could the loss of sales/ revenue by other organizations that manufacture drugs to cure flu.

Explanation

A negate externality refers to business transaction cost which affects a third party. In the economy transaction, the first party is the producer and the second party is the consumer while the third parties include organization, individual, resource, or property owner affected indirectly.

In this case above, for a new miracle cure for the flu that consumers can purchase, the first party is the producer or provider of the miracle cure, the second party is the consumers who purchase, and the third parties are any other individuals or organizations which are indirectly affected.  A potential negative externality would therefore be the loss of sales/revenue by other organizations that manufacture drugs to cure flu. The new miracle cure for the flu will reduce the market for other firms which manufacture related drugs for flu.

Reference

https://www.economicsonline.co.uk/Market_failures/Externalities.html