Aug 10, 2025 · What Is an Externality? An externality occurs when an activity by one party causes a cost or benefit to another party. These effects can be either negative or positive.

The concept of externality was first developed by Alfred Marshall in the 1890s [1] and achieved broader attention in the works of economist Arthur Pigou in the 1920s. [2] The prototypical example of a …

What is an Externality? An externality is a cost or benefit of an economic activity experienced by an unrelated third party. The external cost or benefit is not reflected in the final cost or benefit of a good …

Externalities occur when producing or consuming a good cause an impact on third parties not directly related to the transaction. Externalities can either be positive or negative. They can also occur from …

1 day ago · What Is an Externality? An externality is a cost or benefit that is caused by one party but financially incurred or received by another. Externalities can be negative or positive. A negative …

Jun 17, 2025 · An externality is a cost or benefit that arises from the production or consumption of a good or service that affects third parties, either positively or negatively, without being reflected in the …

Such unaccounted-for consequences are called externalities. Because externalities are not accounted for in the costs and prices of the free market, market agents will receive the wrong signals and …