What are Positive Externalities
- Positive externalities are beneficial side effects or consequences that result from an economic activity and positively affect third parties who are not directly involved in that activity. These externalities often bring about additional social benefits that are not considered by the parties engaged in the activity.
How Do I Remember it?
- Think of “positive externalities” as the extra good things that happen because of an economic action.
- Unlike negative externalities, these are positive and spread beyond the immediate participants, bringing additional benefits to others.
Real World Example
- Consider the use of electric cars to reduce emissions. The positive externality here is the environmental benefit that extends beyond the individual car owners.
- By choosing electric vehicles, owners contribute to lower air pollution and reduced greenhouse gas emissions, leading to cleaner air and a healthier environment for the entire community, even those who don’t own electric cars.
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