➡️ EB is the sum of the marginal social benefits (MSB) and marginal private benefits (MPB) of a good or service, plus any marginal external benefits (MEB). MSB is the benefit to society as a whole, while MPB is the benefit to the individual consumer. MEB is the benefit to a third party not directly involved in the transaction.
➡️ The total EB of a good or service is the sum of the MSB, MPB, and MEB. This total EB is then compared to the marginal cost (MC) of producing the good or service to determine whether it should be produced. If the EB is greater than the MC, then it is economically efficient to produce the good or service.
➡️ The concept of EB is important for understanding the economic efficiency of a good or service. It helps to determine whether the good or service should be produced, and if so, how much should be produced. It also helps to identify any externalities that may be associated with the production of the good or service.