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In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced components that are involved in either consumer or producer market transactions.
Jan 24, 2024 · Will Kenton. Updated January 24, 2024. Reviewed by. Peter Westfall. Fact checked by. Katrina Munichiello. What Is an Externality? An externality is a cost or benefit that is caused...
- Will Kenton
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An externality is a cost or benefit of an economic activity experienced by an unrelated third party. The external cost or benefit is not reflected in the final cost or benefit of a good or service. Therefore, economists generally view externalities as a serious problem that makes markets inefficient, leading to market failures.
Apr 17, 2024 · An externality is a positive or negative spill-over affect on a third party after an economic transaction has taken place between two involved parties. Externalities occur when there are external costs or benefits which spill-over from an economic activity into the general public.
Jul 17, 2023 · Learning Objectives. Use an example to discuss the concept of a positive externality. Positive externalities are benefits caused by transactions that affect an otherwise uninvolved party who did not choose to incur that benefit. Externalities occur all the time because economic events do not occur within a vacuum.
In economics, a network effect (also called network externality or demand-side economies of scale) is the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products.
Externalities – Definition. Externalities occur when producing or consuming a good cause an impact on third parties not directly related to the transaction. Externalities can either be positive or negative. They can also occur from production or consumption.
