When a good has unintended benefits is called a positive externality. If you relied on markets to deliver goods with positive externalities like immunization, you would find that the resulting number of immunizations would be less than the socially optimal number needed to reach herd immunity levels. In other words, the market would under-supply immunization.

There are also negative externalities. The classic example is smoking. a) How is smoking a negative externality? (2 marks) b) What might governments do to limit this externality? (2 marks)