Economics Externalities Questions
A network externality refers to the effect that an individual's consumption or use of a good or service has on the value of that good or service for others. It occurs when the value of a product increases as more people use it, leading to a positive feedback loop. Examples include social media platforms, where the more users there are, the more valuable the platform becomes for everyone.
On the other hand, a positive externality refers to the positive spillover effects that a person's consumption or production has on others who are not directly involved in the transaction. It occurs when the social benefit of a good or service exceeds the private benefit. For instance, when a person gets vaccinated, not only do they benefit from protection against a disease, but they also contribute to the overall health and well-being of the community by reducing the spread of the disease.
In summary, the main difference between a network externality and a positive externality is that a network externality specifically relates to the value of a good or service for others, while a positive externality refers to the broader positive effects on individuals or society as a whole.