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Positive externality, in economics, a benefit received or transferred to a party as an indirect effect of the transactions of another party When we add external costs to private costs, we create a marginal social cost curve. Positive externalities arise when one party, such as a business, makes another party better off but does not receive any compensation for doing so.

Conversely, a positive externality provides an unintended benefit, like improved public education systems leading to a more skilled workforce, which aids the broader economy In the presence of a positive externality (with a constant marginal external benefit), this curve lies above the demand curve at all quantities There are two main types of externalities

For example, water pollution affects all consumers but is not caused by them

Water pollution is, therefore, a negative externality A positive externality, on the other hand, benefits the third party. In contrast, negative externalities are the harms to those third parties. The reduction in pollution benefits everyone in the surrounding area (and globally, in the case of greenhouse gases)

Cleaner air leads to better public health outcomes (fewer respiratory illnesses, lower healthcare costs) and a healthier environment. This occurs when the consumption or production of a good causes a benefit to a third party When you consume education you get a private benefit But there are also benefits to the rest of society.

Negative externalities generate costs and spillover effects, leading to market failures and the overuse of common resources

On the other hand, positive externalities generate benefits and spillover benefits, also leading to market failures and missed opportunities for societal welfare. A positive externality, on the other hand, is when one party receives an indirect benefit as a result of actions taken by another Externalities can stem from either the production or consumption of a good or service. Positive externality is when a third party benefits from another party deciding to consume or produce a product or service.

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