What is a negative externality

Negative externality occurs when the person or the firm making a specific decision did not pay for the cost of the decision. The good has a negative externality when the cost to the society is higher than the cost the consumer is paying. In that case, negative externality always lead to inefficiency in the markets until no proper action is taken. The society usually suffers because when negative externality happens especially in unregulated markets, the firms do not take responsibility for it instead, pass it on to the society causing the supply curve to shift down.