Externality — Social Studies definition
A relevant effect on others outside a transaction not fully reflected in the decision.
Where it is taught
- Externalities, Public Goods & Policy Responses — Economic Foundations & Market Decisions, Government, Civic Participation & Economics, Grade 12
In use
An externality affects others outside the transaction without the effect being fully reflected in the decision.
Externalities, Public Goods & Policy Responses
Questions using externality
Problem 1
Why does identifying an externality not establish a complete policy solution?
Answer and explanation
A response still needs reliable measurement, authority, administration, incentives, and comparison with alternatives. Explain its mechanism and limits, including who bears costs. The original problem does not guarantee every proposed remedy works.