An externality is a terminology in economics referring to a cost /a benefit incurred / received by a 3rd party. However, the 3rd party has no control over the formation of that cost / benefit.
An externality can be both negative/ positive & can crop up from either the manufacturing / consumption of a commodity. The costs & the benefits can be both private—to a person / an organization—or social, implying it can impact society as a whole.
Few of the externalities are positive. They occur when there’s a positive gain on both the private & social level. R&D done by a firm can give rise to a positive externality. It augments the private profits of a firm and also has the additional benefit of escalating the general level of know-how within a society. So, whilst a firm like Google makes profits from its Maps app, society at large benefits greatly in the form of a GPS instrument. Positive externalities have public—or societal—returns which are greater than the private returns.
Similarly, the stress on education is a positive externality as well. Investment in education leads to a cleverer & more intelligent labour force. Firms benefit from recruiting staff members who are educated as they’re knowledgeable. This benefits firms because a better-educated labour force needs less investment in training & development expenses.
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