1. Costs or benefits of an economic activity experienced by unrelated third parties, not reflected in market prices.
Usage: Economics term; Usually plural; Can be positive (benefits) or negative (costs)

Examples

• Air pollution from a factory is a negative externality that affects nearby residents.
• The externalities of fossil fuel production include climate change and health problems.
• Education creates positive externalities by benefiting society beyond the individual student.
• Economists argue that externalities should be priced into market transactions.
• The company did not account for the environmental externalities of its manufacturing process.
• Positive externalities like vaccination benefit the entire community, not just the vaccinated person.