Question

Problem 1

Answer 1

Introduction

Negative externality is defined as a cost that is borne by a third party as a consequence of a transaction that is economic in nature. So, in those transactions, the producer and consumer are regarded as the first and the second parties, and the third parties include any organisation, individual, property owner that is indirectly affected.

 

Positive externality is defined as a benefit that is received by a third-party as a consequence of a transaction that is economic in nature. The Third-parties include any organisation, individual, property owner that is indirectly affected.