What is a positive externality?

Answer 1

A positive externality is a benefit that is enjoyed by a third party as a result of an economic transaction between two other parties. In other words, it is a positive impact that spills over to individuals or the society beyond the immediate participants. Positive externalities can arise in various situations, such as when a person's education leads to the betterment of society as a whole, or when a company's research and development efforts contribute to technological advancements that benefit multiple industries.