Explain what is meant by the term ‘negative externality’ and explain how excessive consumption of alcohol leads to negative externalities.

A negative externality represents disequilibrium between the social cost and benefits that occur from an individual consuming a particular good. The individual only takes into account the private benefit of consuming the good in question and not the potential social cost of their actions. This often leads to an overconsumption (according to social-welfare analysis) of typical negative externality goods such as cigarettes and alcohol.Excessive consumption of alcohol often leads to crimes being committed in the form of NHS costs, excessive noise late at night and vandalisation of property. All of these events often lead to public services (i.e. police and ambulance) being called and therefore a financial cost is borne by society. Furthermore, the vandalisation of property will cost the owner a direct monetary cost. These costs outweigh the social benefits from the consumer spending money and contributing to the economy via a purchase of the alcohol.