Which statement defines externality?

a) It is a change in demand brought about by factors other than price.

b) It is the external factors that cause a rise in the supply of goods or services.

c) It is the external factors that cause a decrease in the supply of goods or services.

d) It is the impact of production and consumption on unrelated third parties.

Question

Business

Amya

21 August, 22:23

Which statement defines externality?

a) It is a change in demand brought about by factors other than price.

b) It is the external factors that cause a rise in the supply of goods or services.

c) It is the external factors that cause a decrease in the supply of goods or services.

d) It is the impact of production and consumption on unrelated third parties.

+1

Answers (1)

Know the Answer?

Derrick Small · Answer 1

I think the correct answer from the choices listed above is option D. It would be the impact of production and consumption on unrelated third parties that best defines the term externality. It is a consequence of an economic activity experienced by unrelated third parties; it can be either positive or negative.