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Glossary

  1. Externalities: Economic side-effects or third-party effects, in which some of the benefits or costs associated with the production or consumption of a product affect someone other than the direct producer or consumer of the product. Can be positive or negative.
  2. Positive Externality: A beneficial or positive side effect that results when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in a market exchange. Sometimes referred to as "third-party benefit" or "spillover benefit," it is a benefit obtained without compensation by third parties from the production or consumption of other parties.
  3. Negative Externality: A negative side effect that results when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in a market exchange. Sometimes referred to as "third-party cost" or "spillover cost," it is a cost imposed on third parties by the production or consumption of other parties.

  4. Regulation: Economic regulation is the prescription of price and output for a specific industry, often a natural monopoly. Social regulation is the prescription of health, safety, performance, environmental, output and job standards across several industries.

  5. Free Riders: People who receive the benefits of something without actually paying.