Economics Externalities Questions
A network externality refers to the positive or negative impact that an individual's consumption or production of a good or service has on the utility or value of that good or service for others. It occurs when the value of a product increases as more people use or adopt it, leading to a positive externality, or decreases as more people use or adopt it, resulting in a negative externality.
On the other hand, a subsidy is a financial assistance or support provided by the government or any other entity to encourage the production or consumption of a particular good or service. It is a form of direct payment or tax reduction that aims to reduce the cost of production or consumption, making the product more affordable or attractive to consumers or producers.
In summary, the main difference between a network externality and a subsidy is that a network externality refers to the impact of consumption or production on the value of a good or service for others, while a subsidy is a financial support provided to encourage the production or consumption of a specific good or service.