Intermediate Microeconomic Theory
A positive externality occurs when a third party benefits from an economic transaction that they are not directly involved in, leading to social benefits that exceed private benefits. This phenomenon can arise in various contexts, such as education or public health, where individual actions contribute to overall societal well-being. Understanding positive externalities is crucial because they highlight situations where market outcomes may not reflect the true value of goods or services, necessitating potential government intervention.
congrats on reading the definition of Positive Externality. now let's actually learn it.