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National Income Accounting — Economics STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEconomicsNational Income Accounting3 Marks
Question
Define externalities. Give an example of negative externality. What is its impact on welfare?
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Answer

Externalities refer to the benefits (or harms) a firm or an individual causes to another for which it is not paid. (or penalised)
Example: Polluting river by an oil refinery.
Impact: Reduces welfare through negative effect on health.

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