Externalities are usually unintended consequences of certain economic activities. In the case of negative externality, the costs do not lie with the originator (producer), but other subjects. Market players in term of market forces are not motivated to eliminate externalities (if the regulation by the state is not properly set).
What is ExternalitiesExternalities are usually unintended consequences of certain economic activity. Externalities are typical example of market failure.
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Last update: 19.05.2016