Externalities In The Housing Industry

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Externalities in the Housing Industry (Additional Pages Request) The housing industry is quite profitable a venture, though it is one that has caused many problems in today's economy, for two main reasons. First, the housing market has been quite volatile, simply because it has been under-regulated in certain areas and has therefore been the subject of a game of chess led by big corporations. Second, the housing industry is often a local matter, and is thus something that cannot be easily moved, transported, or transplanted, and for this reason it is in many ways unique. In order to better understand the way in which this industry works, this paper will discuss externalities, goods and services within this arena, as well as the many other concepts that relate to these terms. Just as many other sectors of an economy, the housing industry is subject to positive and negative externalities. Externalities, by definition, signify costs or benefits that are not transmitted through prices, but that are nonetheless incurred by a 'third party' or a party that did not agree to or was not part of an action or a transaction that caused the said cost or benefit. Within these confines, thus, positive externalities become (external) benefits, and negative externalities become (external) costs. These economic terms are useful because they help people understand and justify cases in which individuals may either be harmed by or benefit from the actions of others (Basic Economics, 2012).

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