The side effect on an individual or entity due to the actions of another individual or entity. For example, the production of energy in a nuclear power plant benefits the owners of the power plant, but creates externalities in the form of radioactive waste for the environment and its inhabitants.

Use externality in a sentence

You need to understand the externality of the situation and make sure to find a way to use it to your advantage.

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A negative externality occurred because the individual did not have to play the full cost of the business decision they made.

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The externality of putting in the new highway was a lot more effort for the department of transportation, and a lot better eating for the locals.

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external economy industrial policy