Theory of External Costs
What are external costs?
- An external costs occurs when producing or consuming a good or service imposes a cost upon a third party.
- An external cost is a cost that a producer or a consumer imposes on another producer or consumer, outside of any market transaction between them. "External" means "outside."
- "Outside" means outside of any buying and selling among people or firms.
Examples of External Costs
Some examples of External costs in using a car are such as air pollution, traffic etc.
Some examples of External Costs in building a tower are air pollution, blockage of road etc.
Sources:
Economics (A complete Course for IGCSE and O Level)
http://en.wikipedia.org/wiki/Transport_economics#Externalities
Economics (A complete Course for IGCSE and O Level)
http://en.wikipedia.org/wiki/Transport_economics#Externalities