Externalities are common in virtually every area of economic activity.
They are defined as third party (or spill-over) effects arising from the
production and/or consumption of goods and services for which no appropriate
compensation is paid.
can cause market failure if the price mechanism does not take into account
the full social costs and social benefits of production and consumption. The
study of externalities by economists has become extensive in recent years -
not least because of concerns about the link between the economy and the