What Is Externality?

What Is Externality?

1 Answer

  1. Externality is a term of economics and it is defined by, “a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices, such as the pollination of surrounding crops by bees kept for honey.” Broadly speaking, externality can be described as an impact of one’s actions on others or we can say that it is the cost or benefit that affects a third party who did not choose to incur that cost or benefit. An externality can be both positive or negative and can stem from either the production or consumption of a good or service.

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