Question

Distinguish between private costs and social costs.

Distinguish between private cost and social cost. Give an example of each. 

Answer 1

Sr. No.	Basis	Private costs	Social costs
1.	Meaning	The costs that a firm actually incurs or pays for producing a commodity are called private costs.	The costs that society has to bear on account of the production of a commodity are called social costs.
2.	Incurred by	Only by the producer or consumer directly involved.	Society as a whole, including third parties.
3.	Concerned	Profit or cost borne by the firm.	Well-being and impact on the environment or public.
4.	Example	A factory paying for raw materials and worker wages.	The same factory emits smoke, causing air pollution and health issues – these external effects add to social cost.