Externality and Types of Externality

Externality: When someone produces and uses goods and services and third parties are affected by this production and use, it is called externality A third party can be affected both positively and negatively by external means. He can be benefited and harmed by externalities. 

 There are two types of externalities

 Positive externality   Positive externality means that when a person produces and consumes a product, the third party will be positively affected by that product. he will get extra benefits for that goods and services

           For Example 

 1. There are none of us who don't love flowers. Flowers and fragrances of flowers give us mental peace. If someone plants a flower garden in front of his own house and he benefits from the fragrance and flowers of those flowers and if the person in the next house also gets peace by seeing or smelling them, then it is called positive externality. 

 2. Also we can say as an example, if someone spends his own money and installs a lamp post in front of his house, then he is benefited by that lamp post and the pedestrians passing by the road are also benefited. Then we can call it positive externality. 

3. We can also say that if someone installs a tube well at home for his own needs and allows everyone else to take water from it besides his own consumption, then it is called a positive externality.

Negative Externality   Negative externality means that if someone produces and consumes goods and services and a third parties is harmed during the consumption and production of goods and services then it is called negative externality. 

 1. smoking is harmful to health. If someone smokes it will harm his health and also harm the person who is smoking next to him. So we can say smoking is a negative externality. Because his smoking is harming the person around him....

   2. Also, for example, if you put your garbage in front of your house, the smell of garbage will disturb people's normal life.It is called negative externality. 

3.  Also if you play music very loud in your house all day and night then people around you may have problem and if you play music and people around you have problem then that is negative externality.