Question

a. What are externalities? b. Give an example of a type of externality (positive of negative)...

a. What are externalities?

b. Give an example of a type of externality (positive of negative) you have experienced recently – we experience them daily – and explain how you would internalize it.

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Answer #1

A) Externlaity is the uncompensated effect on the bypasser. In simple words it is the effect of one party on another without compensating second person.

b) My neighbour plays loud music due to which I gets disturb when I have to study is an example of negative externality

My neighbour planted 20 trees which makes air around us fresh, leading a positive impact and thus an example of positive externality

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