Does the transaction of a buyer and seller directly affect a third party in home building? Is the effect a negative or positive externality in home building? Explain.
Say you have an empty lot next to your house. The empty lot looks terrible because nobody is taking care of the lawn, garbage seems to accumulate, etc.
Somebody buys the lot to build a house. Are you happy, sad, or indifferent?
Now, you find your new neighbors have a drummer who likes to practice at 2am. Are you happy, sad, or indifferent?