Registration Number: 1 1 9 2 5 1 6 0 9

Name : P.Wijendra
Course Code and Title: DSU 3532 – Principles of Economics II
Continuous Assessment – Semester 2 – TMA 3
Programme: BA Degree in Social Sciences–level 3
(Society&Culture Studies)
Regional Centre: Batticaloa

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Question 1: Discuss the concept of externalities in the context of promoting locally
manufactured products (made in Srilanka) as a result of the global pandemic.

Externality is an economical concept, which occurs while producing any good/service

or consuming any good/service, that impacts other people than the people who are directly
involved in the process of production or consumption of any product or service. The impact
may either be positive or negative, and also it is not make any changes in the market price of
that commodity. It may affect either producers or consumers either by other producers or
consumers.
Externality
Production (goods/service) Consumption (goods/service)
Positive Negative Positive Negative
Bee-keeping Air & water pollution Using face mask Smoking in public
Pollination of plants Environmental issues Prevent contagious disease Respiratory issues
Plantation projects Use of fertilizers Pest control treatments Gambling and alcoholic
Good environment Damage land and crop Keep the environment clean Affect the families

The above chart depicts both positive and negative externalities clearly with examples.

During global pandemic, to constrain the issue of contagion, there are no exports or
imports taking place from one country to another. There is a need to meet our day today life
requirements without any stumble. Continuous supply of provisions should be taken care in
order to prevent any shortage within the country, and to have a functional economy. To make
sure and maintain the sustainable food system, every country should motivate and initiate the
productivity and supply of essential provisions which are locally used within the country.
As we see the above explanation and example of externality, these productions will
not only benefit the producer and consumer, but also others (third party) who are not directly
engaged in the process of production or consumption. This concept is known as externality.
As per my opinion, In Srilanka, mainly, two kinds of products, which are discussed below,
should be focused, promoted and encouraged. The externality may result both positive and
negative impacts. But the country’s concentration should be fully on positive externality to
keep the environment clean and healthy. As our country’s own recourses are sufficient to
produce basic provisions,
production of these commodities will help the country to maintain its economical
stability too, even in the crisis situation such as global pandemic in a self sufficient manner.

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1) Externality in producing re-usable quality face-masks and natural sanitizing products.
Using face masks and essential sanitizing products are not only effective benefits for
the users from catching the disease from outside, but also it is very helpful and beneficial to
others too who are being around the user preventing them from catching contagious diseases
from the particular user. This is known as positive externality by which a third party is able to
be free from risk.
In fact, ordinary disposable face-masks’ wastes extremely pollute the environment
that may be resulting negative externality, but when we give importance to produce re-usable
quality face-mask produced with natural and hygienic material, the risk of environmental
pollution declines and really benefits the people. Likewise, sanitizing products which are
produced with chemical and artificial materials also affect the environment and lives. This
negative externalities need to be eradicated, and the people must be compatible with the
naturally and organically produced cost effective sanitizing gel and liquids that will result
positive externality.
2) Externality in producing agricultural products.
During such pandemic time, promoting agriculture products such as fruits, vegetable,
grains and medicinal plants seems to be the most significant and core element. Nutritious
food to everyone is necessary thing of any society. To prevent shortage of food items and
health related issues, we have to give attention to engage in agricultural activities to produce
healthy and sufficient food. If we are producing enough food within the country supply of
provisions will never run out. We will be able to utilize unused land for agriculture and
unused ponds for irrigation by re-excavating them. These processes will contribute a lot to
the nation economically by providing job opportunities. As well as the landscape will
improve and develop in an attractive manner. Global warming threats will start to decline and
we will be able to re-emerge with the nature and to live a healthier life like our previous
generations. Through such self productivity and development projects, people of
communities and societies will benefit positive externality which are risk-free health and
quality life.

For an example, when we do plantation of pineapple, a producer of honey will have

positive externality by the bees he is keeping, likewise, some other owner of any other fruit
trees benefits positive externality by bees that make a good pollination.

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 Promoting the production of small scale vegetables at home gardens will definitely
support the families’ healthy and economically better life.
Considering the above facts, it is not only the government’s responsibility to promote the
local products, but also every citizen’s responsibility to engage or invest in agriculture
production which will give a great deal of positive externalities to the communities, societies
and to the nation.

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