1. Externalities is a cost or benefit not
transmitted trough prices ,it is the
outside the Market Mechanism .

2.  Externalities are created when social costs and
benefits differ from private costs and benefits .

3.  Market prices and profits can be misleading as
they are not the true value prices and profits to
the society .

4.  Market putting wrong signals leading a
Misallocation of resources.

5.  External costs of production
By driving a car consumers increase the amount
of pollution.

6.  External benefits of consumption
By listening to music ,the pleasure can be private
(only for a person or specific group of people )
and also can be social (provide
enjoyment/entertainment to the others around
you )

7.  For example consumption , consumer can
create externalities like :
-pollution from cars and Motorbikes
-Litter on streets and in public places
-Vandalism of public property

8.  Positive externalities create mostly benefits ,ex:
-research and development -> government
intervention (subsidize it )
-education (consumption) -> social benefit is
greater than private benefit

9.  Moral codes and social sanctions
 Voluntary organization
 Internalization (when activities with
complementary externalities are merged into
one firm ,thus eliminating the externality )
 Contracts –Parties through negotiation can
agree as to how to regulate the externality .

10.  http://tutor2u.net/economics/content/topics
/externalities/what_are_externalities.htm
 http://users.hunterlink.net.au/~ddhrg/econ/
ext1.html
 http://www.econlib.org/library/Enc/Externa
lities.html
 Etc.