Somtochukwu

Externality is a type of market failure. It can be positive or negative. Externality leads to inefficiency in distribution.

Externality can be defined as any cost or benefit generated by one agent in its production or consumption activities but affecting another agent in the economy.

Externalities are also described as cost or benefit of a transaction that are incurred or received by other members of the society but not taken into account by the parties of the transaction.

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