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Externalities

Externalities are side-effects of activities or economic transactions that affect people who did not take part in the activity or transaction. Externalities can be negative (for example second-hand smoke from cigarettes can make other people ill) or positive (for example vaccines can protect those who do not receive them, by reducing the spread of disease). Externalities are not usually reflected in the price of an economic transaction, because the costs are usually borne by third parties.