1. Externalities Else Blough

2.  Externalities- the impact an economic transaction has on a third party which is uninvolved in the transaction.

3. Negative Externalities Negative externalities are the negative side effects an economic transaction or a business has on a third party. Some examples- air pollution, water pollution, car conjestion or second hand smoke.

4. The Graph

5. Positive Externalities A positive externality occurs when a transaction creates benefits for a uninvolved third party. Some examples are – Flu Shots and other vaccinations, when people improve their house or yard,

6. The Graph

7. The oil spill last year in the Gulf coast is a good example of negative externalities. http://www.youtube.com/watch?v=ha- ssoI6S0Qhttp://www.youtube.com/watch?v=ha- ssoI6S0Q http://www.youtube.com/watch?v=hvMAec 06_Uohttp://www.youtube.com/watch?v=hvMAec 06_Uo