WHAT IS THE IMPACT ON

BUSINESS OF COMMUNOITY
EXTERNALITY
It's important to understand the effects of
manufacturing and consuming goods and services as a
business or consumer to reduce the effects of negative
externalities. While sometimes these are positive
effects, externalities can also be harmful to third
parties. Recognizing the by-products of the production
and consumption of goods can benefit society and
businesses alike.
What is Externalities?
What is Externalities?
• An externality is a cost or benefit associated with the
production or consumption of a product or service.
Externalities affect third parties who don't take part in
the production of a product and don't consume the
product or service. Economists input all costs and
benefits to assign value to an externality and qualify
this as a cost or benefit.
https://www.indeed.com/career-advice/career-development/positive-and-negative-externalities
2 TYPES OF EXTERNALITIES
2 TYPES OF EXTERNALITIES
POSITIVE EXTERNALITY
• A positive externality is a benefit of producing or consuming a
product.
• A benefit received or transferred to a party as an indirect effect of
the transactions of another party.
Example
• Education
• Environment
• Technology
2 TYPES OF EXTERNALITIES
2 TYPES OF EXTERNALITIES
NEGATIVE EXTERNALITY
• Negative externalities occur when the consumption or production of
a good causes a harmful effect to a third party.
• These consequences outweigh the private benefit gained by using a
product or service.
Example
• Pollution
• Building a new road
• Social actions
TYPES OF EXTERNALITIES
• POSITIVE EXTERNALITIES OF PRODUCTION
• POSITIVE EXTERNALITIES OF CONSUMPTION
• NEGATIVE EXTERNALITIES OF PRODUCTION
• EXTERNALITIES OF PRODUCTION CONSUMPTION