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 …

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.

Consumption, production, and investment decisions of individuals, households, and firms often affect people not directly involved in the transactions. Sometimes these indirect effects are tiny. But when …

3 days 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 …

An externality, in economic terms, is a side effect or consequence of an activity that is not reflected in the cost of that activity, and not primarily borne by those directly involved in said activity.

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 …

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 …

The meaning of EXTERNALITY is the quality or state of being external or externalized. How to use externality in a sentence.

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 …

The effect of a market exchange on a third party who is outside or “external” to the exchange is called an externality. Because externalities that occur in market transactions affect other parties beyond those …