Positive externalities, also known as external benefits, occur when the production or

consumption of a good or service benefits third parties who are not involved in the transaction.
These benefits are not reflected in the market prices, leading to underproduction or
underconsumption from a societal perspective.

Examples of Positive Externalities

1. Education:
○ Individual Benefits: Improved knowledge and skills increase personal income
and job opportunities.
○ Societal Benefits: An educated population leads to higher productivity,
innovation, and economic growth. Education also reduces crime rates and
improves civic engagement.
2. Vaccination:
○ Individual Benefits: Vaccines protect individuals from infectious diseases.
○ Societal Benefits: Herd immunity reduces the spread of diseases, protecting
those who cannot be vaccinated, such as infants or immunocompromised
individuals.
3. Public Parks and Green Spaces:
○ Individual Benefits: Access to recreational areas improves physical and mental
health.
○ Societal Benefits: Green spaces enhance community well-being, reduce urban
heat islands, and improve air quality.
4. Public Transportation: