Concept explainers
What is externality and examples of positive and negative externality.
Explanation of Solution
An externality can be beneficial or cost which means it may be positive or negative externality. The impact of one’s action on the well-being of another is termed as an externality. The classic example of an externality is pollution. The production of goods emits pollutants in the environment which leads to different kinds of pollution like air pollution and water pollution. and so forth. This causes health problems for the people who are living near the production area. The example of a positive externality is restoration of historical buildings, facts which are leading to the formation of new research and education experiments and so on.
Concept Introduction:
Externality: Externality is the impact of one person's actions on the well-being of a bystander. The externality is two types, positive and negative.
Positive externality: If the impact of one person’s action on the bystander is beneficial, it is known as a positive externality
Negative externality: If the impact of one person’s action on the bystander is adverse, it is known as a negative externality.
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