Definition
An externality is a cost or benefit affecting someone not involved in a transaction.
Why It Matters
Externalities lead to inefficient market outcomes.
Example
Noise pollution from a factory.
Malone Global University
Malone Global University
Economics Glossary – Malone Global University
An externality is a cost or benefit affecting someone not involved in a transaction.
Externalities lead to inefficient market outcomes.
Noise pollution from a factory.