Economics Externalities Questions
A positive consumption externality occurs when the consumption of a good or service by one individual creates a benefit for others who are not directly involved in the transaction. This means that the social benefit of consuming the good or service exceeds the private benefit received by the individual consumer.
On the other hand, a negative consumption externality arises when the consumption of a good or service by one individual imposes a cost or harm on others who are not directly involved in the transaction. In this case, the social cost of consuming the good or service exceeds the private cost borne by the individual consumer.