[ek-ster-nal-i-tee] 
| 1. | the state or quality of being external. |
| 2. | something external; an outward feature. |
| 3. | excessive attention to externals. |
| 4. | an external effect, often unforeseen or unintended, accompanying a process or activity: to eliminate externalities such as air pollution through government regulation. |
| ex·ter·nal·i·ty (ěk'stər-nāl'ĭ-tē) n. pl. ex·ter·nal·i·ties
|
Externality
A consequence of an economic activity that is experienced by unrelated third parties. An externality can be either positive or negative.
Investopedia Commentary
Pollution emitted by a factory that spoils the surrounding environment and affects the health of nearby residents is an example of a negative externality. An example of a positive externality is the effect of a well-educated labor force on the productivity of a company.
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See also: Economics, Macroeconomics, Microeconomics
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