Growth of the American Economy
Positive externalities occur when an economic activity produces benefits that affect third parties who are not directly involved in the transaction. These spillover effects can enhance social welfare and productivity, often leading to underinvestment in certain areas as private individuals or firms do not capture the full benefits of their actions. This concept is particularly relevant in discussions about public goods, innovation, and education, as these sectors often generate significant positive externalities that can drive overall economic growth.
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