Definition

A situation where a decision or action has effects on others that are not reflected in the costs or benefits of that decision, often seen in economics and environmental issues.

Example

Pollution is often considered an externality because it affects people who are not involved in the production process.

Conversation

Have you ever thought about how pollution is treated as an externality?

Yeah, it's crazy how we just ignore the costs it brings to the environment.

Exactly! It makes me wonder what we can do to change that perspective.

I think raising awareness is a good start, so more people understand the impact.

Synonyms & Antonyms

Root Explanation

Externality → It is formed from "externus" (meaning outside) and the suffix "-ity" (meaning the state or condition of). The word "externality" refers to the state of being outside or external, often used in economics to describe the impact of a transaction on third parties not involved in the transaction.

Memory Tip

Think of something that is 'outside' ('externus') and the '-ity' that indicates a state or condition. This helps you remember that 'externality' refers to the condition of being outside or affecting those not directly involved.

Visually Confused Words