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An externality is an economic concept that refers to a situation where the actions of individuals or businesses have an impact on third parties who are not directly involved in the transaction. Externalities can be either positive or negative. 1. **Negative Externality**: This occurs when the actions of an individual or company result in harmful effects on others. For example, pollution from a factory can adversely affect the health of people living nearby or the quality of natural resources.

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  1. Inefficiency in game theory
  2. Game theory
  3. Fields of mathematics
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