True Cost Economics Definition


By CLAY HALTON on investopedia.com

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True Cost Economics is an economic model that seeks to include the cost of negative externalities into the pricing of goods and services. It is based on the belief that the societal cost of producing a product or rendering a service may not be accurately reflected in its price. It involves forcing companies to "internalize" the negative externalities, which will increase market prices. Consumers may be affected by the increase in prices if the environmental cost of extracting and refining the necessary elements for products are factored into their price. Governments may also impose taxes to influence consumer behavior and/or provide the means for future remediation.


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