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Question
Discuss briefly the concept of 'Externalities', with suitable example.
Solution
Externalities: It refers to the positive or negative impact of an activity without any cost or penalty.
- Positive Externality: Externality is defined as having a positive impact on a third party without incurring any costs. For E.g. Construction of a flyover reduces journey time, a beautiful park in front of your house, etc.
- Negative Externality: Without his/her own fault, he/she has a negative impact on a third party. For E.g. Contaminated water from factories, Smoke emission from chimneys of factories, etc.
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