Externalities
Definition
Externalities are the unintended consequences of economic activities that affect third parties who are not involved in the transaction. They can be positive (beneficial) or negative (harmful).
Related terms
Market Failure: When markets fail to allocate resources efficiently due to externalities or other reasons.
Positive Externality: A beneficial impact on third parties resulting from an economic activity.
Negative Externality: A harmful impact on third parties resulting from an economic activity.
"Externalities" appears in:
Subjects (1)
AP Macroeconomics
Study guides (3)
AP Microeconomics - 1.2 Resource Allocation and Economic Systems
AP Microeconomics - 6.1 Socially Efficient and Inefficient Market Outcomes
AP Microeconomics - 6.5 Inequality
Additional resources (1)
AP Microeconomics - 2024 AP Microeconomics Exam Guide
Practice Questions (1)
A graph showed MSB above MPB—what type of externalities is this?
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About Us
About Fiveable
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Terms of Use
Privacy Policy
CCPA Privacy Policy
Resources
Cram Mode
AP Score Calculators
Study Guides
Practice Quizzes
Glossary
Cram Events
Merch Shop
Crisis Text Line
Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.