Answer to Question #73480 in Microeconomics for Noor

Question

Explain the concept of externalities and discuss one type of externality that may be encountered in an economy

Answer 1

Externality is related to economic activity whose results have an impact on third parties. External effects are possible both positive and negative. For example, the negative effects are pollution of the environment by the emissions of factories, cars, the general industry to the environment, where people live, which are subject to the negative effects of this economic activity. Positive effects are the development of new scientific and technological devices, and networks that improve the lives of all people.