1. On the concept of externality, answer the following questions. There is no need to draw any graphs for these questions.

a. Explain the concept of externality as it relates to the demand for a product. If the externality is positive, what would this imply about the private versus the social demand curve (social marginal benefit curve).

b. Explain the concept of externality as it relates to the supply of a product. If the externality is negative, what would this imply about the private versus the social supply curve (marginal social cost curve).