Question

What do we mean by externalities, in the context of public goods?
Please, include an example of a positive and a negative externality.

Answer 1

When there is transaction between first two parties and the effect can be seen on the third party either in a positive or in a negative way then the situation is called externality

A public good is that type of good which is non-rival and non excludable in nature

for example park ,light House etc

1 if we talk about positive externality then it creates a positive impact on the third-party

the best example of this is having a beautiful garden then it will be beneficial for the environment of the neighbours as well

2 example of negative externality can be pollution done by a car and a person standing nearby it

the effect is seen on the third party in which the third party is not involved