A negative externality exists when the production or consumption of a product results in a cost to a third party. Air and noise pollution are commonly cited examples of negative externalities.

What are 2 examples of negative externalities?

Negative consumption externalities

When certain goods are consumed, such as demerit goods, negative effects can arise on third parties. Common example include cigarette smoking, which can create passive smoking, drinking excessive alcohol, which can spoil a night out for others, and noise pollution.

What is an example of a positive and negative externality?

For example, a factory that pollutes the environment creates a cost to society, but those costs are not priced into the final good it produces. These can come in the form of 'positive externalities' that create a benefit to a third party, or, 'negative externalities', that create a cost to a third party.