Question

​suppose you are enjoying a conversation with a friend in your car, when a vehicle pulls up next to you with the audio system turned up to maximum, drowning out your conversation. although the driver appears to be enjoying himself, this could be an example of

Answer 1

Answer: Externality

Explanation:

When actions of one person affects actions of other persons around, it causes an externality. Externality refers to the benefits or losses imposed on other parties who did not choose to perform the action involving the benefit or loss. For, instance when your actions benefit the person around you, it creates a positive externality. While, when your actions imposes a cost on person around you it creates a negative externality.

So, when the loud music disrupts your conversation it creates an externality.