Question

Please try ot find an example of innovation with positive or negative externality (refer to the example of car in my class), describe why there is externality and how the externality would have effect on the market of the specific innovation.

Answer 1

Answer : Introduction of fuel efficient BS6 engines cars in India is an example of innovation with positive externality.

It is so because BS6 technology aims at reducing pollution which helps in conserving environment. Externality is costs or benefits to third party on consuming or producing goods and services.

Less pollution will lead to less diseases which will make people healthy.

Positive externality will increase the market of specific innovation. It is so because people will purchase more cars of this technology as it will be having more fuel efficient cars with low pollution.

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