Read the teacher guidance before using this resource. Divide the students into pairs or threes and give them the printable grid and cut-up images.

Then ask the students to decide in each case:

  • where to place each good or service on the grid;
  • what the external cost or benefit is;
  • who is impacted by the external cost or benefit and why;
  • why is each one a problem for a free market (over/under consumption is the basic idea).

Invite them to the whiteboard to use the interactive resource to show you how they placed the good or service on the grid.

  • smokingSmoking
  • powerPower generation
  • pharmaceutical manufactureGSK
  • universityEducation
  • starbucksStarbucks
  • water pollutionIndustrial pollution
  • facebookFacebook
  • beerBeer
  • hospitalHealth
External cost
External benefit
Consumption
Production
  • Health: External benefit in consumption (reduced contagion, impact on businesses from healthier workforce).
  • Education: External benefit in consumption (better skilled workforce, reduced training costs for firms).
  • Facebook: External benefit in consumption (network effects – one extra user makes it more valuable to existing users. However, there are also negatives, obviously).
  • Smoking: External cost in consumption (passive smoking, drain on NHS).
  • Power generation: External cost in production (CO2 emissions causing flooding elsewhere in the world etc.).
  • GSK: External benefit in production: (research and development makes profit for GSK but also benefits third parties as cures are found).
  • Starbucks: This is highly arguable. External benefit in production (free Wi-Fi – we can 'free ride'). External cost in consumption (litter etc.).
  • Beer: External cost in consumption: (Anti-social behaviour, drain on NHS).
  • Industrial pollution into rivers: External cost in production.