Science Fair Project Encyclopedia
A pecuniary externality is an externality which operates through prices. For example, an influx of city-dwellers buying second homes in a rural area can drive up house prices , making it difficult for young people in the area to get onto the property ladder .
This is in contrast with real externalities which have a direct impact on a third party. For example, pollution from a factory directly harms the environment.
Both Pecuniary and real externalities can be either positive or negative.
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