A negative impact is known as a negative externality while a positive impact is known as an positive externality.
Negative externalities occur when the product or consumption of a good or service exerts a negative effect on the third party independent of the transaction.
An ordinary transaction generally involves two parties, i.e., a consumer and the producer, who are referred to as the first and second parties in the transaction. Any other party which is not related to the transaction is referred to as a third party.
Positive externalities: This occurs when the consumption and production of a good causes a benefit to a third party. For example:
When one consumes education he gets a private benefit. But there are also benefits to the rest of society also.
A farmer who grows apple trees provides a benefit to a beekeeper. The beekeeper is getting a good source of nectar to help make more honey from the growing of apple trees.
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