An externality exists when an individual other than the demander receives part of the benefits.

Question

Quizplus · Accepted Answer

An externality refers to an economic concept where an individual or a group of individuals receives benefits or incurs costs due to the actions of others, without being directly involved in those actions. In the context of this question, an externality exists when someone other than the demander (the person who is willing to buy a good or service) receives part of the benefits. This is a common occurrence in many economic situations, such as when a factory pollutes a nearby river, benefiting the factory while harming the local community.

An Externality Exists When an Individual Other Than the Demander