What is an externality?
1 Answer
Dec 15, 2015
An externality is an affect felt by a party that had no part in the decision that led to it.
Explanation:
For instance, say that there is a mining company that chooses to drill in Surprise, Arizona. The people of Surprise do not have any part in the company's decision to do so. When mining, the company leaks chemicals into the city's water. This effects the citizens of Surprise.
The chemical water is an externality. In other words, it is an affect felt by those who had no part in the decision that made it. In this case, it was felt by the citizens of Surprise who had no part in the decision to mine.
