Classic example of a negative externality: pollution, generated by some productive enterprise, and affecting others who had no choice and were probably not taken nto account.
Example of a positive externality: Purchase a car of a certain model increases demand and thus availability for mechanics who know that kind of car, which improves the situation for others owning that model.
Terms related to Externality / Externalities:
- What is Wrong with the Coase Theorem?
- Pigovian Taxes - Joining the Pigou Club
- If Banning Incandescent Light Bulbs Saves Money, Is It Good Public Policy? No.
Books on Externality / Externalities:
- Naked Economics: Undressing the Dismal Science
- The Theory of Externalities, Public Goods, and Club Goods
- Public Goods, Environmental Externalities and Fiscal Competition