When do social costs and demand intersect?

The intersection of social costs and demand occurs at the market equilibrium. This point reflects a balance in the marketplace where the quantity of a good supplied equals the quantity demanded by consumers, leading to a stable price. At this equilibrium, the social costs, which encompass all costs associated with a good including externalities, align with the willingness of consumers to pay (reflected in demand). When social costs and demand intersect at this point, it indicates that resources are allocated efficiently, maximizing total welfare in the economy.

In other circumstances, such as during economic collapse or government intervention, market dynamics are disrupted, and the intersection between social costs and demand no longer represents a balance of supply and demand. Similarly, when demand is zero, there is no market for goods, and thus no meaningful interaction with social costs can occur. Therefore, the intersection of social costs and demand truly reflects equilibrium conditions in a functioning economy.