Economics Environmental Externalities Questions
An environmental externality refers to the unintended and uncompensated impact of economic activities on the environment or third parties. It occurs when the production or consumption of goods and services generates costs or benefits that are not reflected in the market price. These external costs or benefits can include pollution, depletion of natural resources, climate change, or damage to ecosystems. Environmental externalities are considered market failures as they result in inefficient resource allocation and can lead to negative consequences for society and the environment.