An externality occurs when an economic activity has either a spillover cost to or a spillover benefit for a bystander. List and thoroughly explain at least three externalities caused by individuals purchasing and driving Sport Utility Vehicles. Categorize each externality listed as positive (spillover benefit) or negative (spillover cost).

Externalities

Step-by-step explanation

Negative externalities

a)Air Pollution Externality-Sport utility vehicles consume more fuel than the normal mid-sized vehicles.This therefore means that the fuel emmisions from sport utility vehicles are generally higher than those from other vehicles.Fuel emmisions from cars are one of the worlds leading cause of global warming and this affects all people not just owners of sport utility vehicles.Global warming is known to cause some diseases and also cause climate change.

b)Safety Externality-Sport Utility Vehicles haveadditional weight,stronger suspension and higher seating position which may lead to a false sense of security by SUV drivers.This may cause this drivers to engage in careless driving habits and engage in lesser preventive behaviour on the roads.Due to their large weight,SUVS are likely to lead to very high fatalities to other road users in the case of accidents ( Kockelman,2002).Thus SUV lead to negative externalities to other road users incase of accidents.

c) Traffic Congestion Externality-Sport Utility Vehicles account for the majority of cars on USA roads.It is thus natural that SUVS play a role in traffic congestion on the roads. Governments continue to increase efforts aimed at road expansion and development but these efforts yield low return in relieving traffic congestion due to increased demand of automobiles and moreso SUVS.