Economics Sustainability Questions
Externalities refer to the unintended consequences of economic activities that affect individuals or entities not directly involved in the transaction. These effects can be positive or negative and are not reflected in the market price.
For example, pollution from a factory can be considered a negative externality. The factory may produce goods at a low cost, but the pollution it generates affects the health and well-being of nearby residents. The cost of pollution is not borne by the factory, but by the affected individuals or the environment.