Answer: the market demand curve will underestimate the social demand curve.
Explanation:
The good or service in question, having an external benefit means that it benefits third parties as well as those who actually bought the good or service. This means that it has a higher social benefit than other goods.
The market demand curve would not cater for the demand for this good adequately because it would only adjust for the private benefits. The social demand curve on the other hand, would be adjusted for the external benefits to show that more people want this good or service.
The market demand would therefore underestimate the social demand curve because it would not adjust for the extra demand that comes with the external benefits.
