Social Cost
Social benefit is the total benefit arising due to the production of goods and services by a firm. The social cost is the total cost to society. It includes both private costs plus any external costs. Social costs include both the private costs and any other external costs to society arising from the production or consumption of a good or service. When assessing the overall impact of its commercial actions in terms of social costs, a socially responsible business operator should take into account its own production expenses, as well as any indirect expenses or damages borne by others. In summary, it is the total cost to society. It includes private costs plus any external costs.
Social costs include both the private costs and any other external costs to society arising from the production or consumption of a good or service. In economics, it is the addition of the private costs resulting from a business deal and the costs imposed on the consumers as a consequence of being exposed to the transaction for which they are not compensated or charged.
The social costs include:
- The cost of natural resources for which the firms are not required to pay, for example, river, lake, atmosphere, etc.
- The use of public utility services such as roadways, drainage systems, etc.
- The cost of ‘disutility’ created through pollution (air, water, noise, environment).
