Principles of Microeconomics / Unit 11 MIC 1001 short lesson, about 20 seconds
Externalities
Captions available
The idea
An externality is an effect of a market exchange on someone outside it, who neither bought nor sold. Negative if it harms the third party, positive if it helps.
In practice
A concert heard from your porch; a neighbor's smoke in your window.
Where people slip
Buyer and seller are both content; the failure is that a third party's cost or benefit never entered the price.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it