Externalities are the unintended negative (or in some cases positive) consequences that an economic transaction between two parties can have on some third party.

Question

Quizplus · Accepted Answer

Externalities can be both negative and positive, and they occur when the transaction between two parties affects someone else who is not involved in the decision-making process. Common examples are pollution, noise, and congestion, which are negative externalities, while education, vaccination, and innovation can be positive externalities.

Externalities Are the Unintended Negative (Or in Some Cases Positive)