Externality - Meaning, Definition & English Examples
An externality is a side effect of an economic activity that affects third parties not directly involved, such as pollution from a factory impacting nearby residents. It can be positive or negative.
Definition:
A side effect or consequence of an economic activity affecting unrelated third parties.
Synonyms:
spillover effect, side effect, unintended consequence, secondary impact
Part of Speech:
noun
Antonyms:
internal cost, direct effect
Common Collocations:
negative externality, positive externality, external costs, market externality
Derivatives:
externalize, externalization
Usage Tips:
Use "externality" to describe unintended impacts of actions on others, often in economics or environmental contexts.
Common Phrases:
"negative externality, " "positive externality, " "external costs"
Etymology:
Derived from Latin "externus," meaning "outside," referring to effects beyond the immediate scope of an activity.
Examples:
- 1. Pollution is a negative externality of industrial production.
- 2. Education creates positive externalities by benefiting society as a whole.
- 3. Noise from construction is an externality affecting nearby residents.
- 4. Companies often ignore externalities like environmental damage in their cost calculations.