Factors whose benefits (called external economies) and costs (called external diseconomies) are not reflected in the market price of goods and services.

Externalities are a loss or gain in the welfare of one party resulting from an activity of another party, without there being any compensation for the losing party. Externalities are an important consideration in cost-benefit analysis.

Use externalities in a sentence

  • Sometimes there are externalities that you just couldn't see coming and when one appears you must act quickly and accordingly.

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  • The externalities involved cannot be immediately accounted for in our report. There are a wide range of implications and ramifications likely to occur.

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  • Some products have many externalities that can not be seen just by breaking down the cost to make and price to sell.

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