Externality

Meaning

A cost or benefit of an economic activity that affects parties who are not directly involved in the transaction and is not reflected in market prices

Origin / Etymology

Latin externus, outward, external

Synonyms

Spillover effect Side effect Third-party impact

Antonyms

Internalised cost Market price

Example Sentence

"Jobless growth creates negative externalities, rising GDP alongside stagnant employment generates social instability that economic indicators fail to capture."

🎯 UPSC Usage

Core economics concept for GS3. Use in answers on pollution (negative externality), education/healthcare (positive externality), Pigouvian tax, carbon pricing, and market failure.

Relevant Subjects