Business Studies Collins Revision Guide. - StudyGuide.PK

EXTERNAL ENVIRONMENT (6)External costs and benefitsCostsBenefits●●●●●●When a business makes a decision regarding the production ofgoods or services, it creates external costs or benefits to thecommunity. For example, if a business wishes to locate in an area,the local council will consider these costs and benefits beforemaking a decision whether or not to support the development.External costs measure the cost to the whole of society of abusiness decision. These include pollution in the form of noise,smell or waste. Another external cost could be the loss of jobscaused by a business closure and the resultant loss of income.External benefits measure the benefit to the whole of society. These caninclude the regeneration of an area by more businesses moving into thearea and extra spending from families where jobs have been created.It is quite difficult to put a monetary value on the external costsand benefits. A development in an area that improves the quality oflife of its inhabitants, such as the provision of a youth club, is hardto put in money terms.Many developments have both external costs and benefits. Forexample, an old factory closing down will cause unemployment inthe area but may remove a source of pollution.Pressure groups can try to cause sufficient publicity to prevent abusiness carrying out a proposed action that has many external costs.Sometimes opposing pressure groups can be involved in the arguments.90