How It Works

InstaEDU makes it easy to find a great tutor and connect instantly

  • Connect with the perfect tutor, anytime 24/7

    Never get stuck on homework again. InstaEDU has awesome tutors instantly available around the clock.

  • Work together with the best lesson tools

    Our lesson space lets you use video, audio or text. Upload any assignment and work through it together.

  • Try it free—then lock in a super low rate

    Anyone can try InstaEDU for up to 2 hours for free. After that, rates start at just 40¢/minute.

What is Positive and Negative Externalities?


Description by Mohammed A. (Entrepreneurship major at Kwantlen Polytechnic University)

An externality is an outcome of an economic decision/activity that affects those are not a part of that decision/activity.

A positive externatlity benefits the parties who are not a part of the decision/activity. For example, using an electric car reduces pollution and positively affect even those who did not buy the car. This is a positive externatlity.

A negative externality is a negative impact on the parties who are not a part of the decision/activity. For example, using a loud TV negatively affects the neighbor and is a negative externality.

Description by Abhishek A. (Strategy and Finance major at Indian School of Business)

Let us first define what an externality is.

An externality occurs when a 3rd party (someone not involved in a transaction) is affected by the actions of the transaction. An externality happens when only private costs and benefits are considered and social costs and benefits are ignored.

Therefore, a positive externality is one where the social benefit is more than social cost and a negative externality occurs when the social costs outweigh benefits. I know, so technical right? Not really, think of social costs and benefits as ALL the costs and benefits of an action, that is how the action not only affects the individual BUT SOCIETY ON A WHOLE. When social benefits and costs are not equal, deadweight loss occurs, and we have externalities. Can you think of any examples of each?

Description by Annie Z. (Economics, Business and Chinese major at University of Rochester)

Externalities are things that affect a given subject without being directly affiliated with a given object. There are two types of externalities that can take place and can either aid or further hinder a subjects' progress. For example a negative example would be that you were late to your class due to the fact that there was a traffic jam on your way to school. Now the traffic jam in this case is your negative externality, causing you to be late to your class. An Example of a positive externality would be that the fact that you got a good night's sleep before your exam in class. Now the sleep was the reason that you were able to do well in your exam and helped you by making you be more energetic.

Description by Uzair A. (Interactive Media & Games major at University Of Southern California ( School of Cinematic Arts) )

Why study Positive and Negative Externalities?

Positive and negative externalities matter because the real world does not conform to a simple supply and demand curve. The world is a complex place, and nearly every phenomenon has multiple causes and multiple effects besides the supply and demand of those directly involved, which economists must acknowledge.

Description by Paul H. (Classics & Economics major at Georgetown University)

See how InstaEDU works:

Looking for help with this?

We can find you a live Positive and Negative Externalities tutor instantly.