Examples of externalities

1.Externality is defined as the cost and benefit that affects someone who is not directly involved in the production on consumption activities.




2.Smoking cigarettes create external cost in consumption as family members who inhale he smoke suffer from cancer and other illnesses











3.Student who pursur higher education benefits society and this is an example of external benefit in consumption.








4.A firm that innovate and benefit other firms from the innovation is creating external benefit in production









5.Consumption externalities creates a divergence in the benefit curve.


-Fabian