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An example of a (negative) externality is a motorist purchasing gasoline from a service station. The transaction is between these two parties. People outside of the transaction, who may not own or use cars themselves (children, elderly, disabled, etc.) are affected by this transaction as they have to breathe the air polluted by the car. Should policymakers implement restrictions on car manufacturers to have ‘cleaner’ exhaust systems in cars (thus increasing the cost of cars)? Should gas companies be forced to have more refined gasolines (thus increasing the costs of fuel)? Or the general population be taxed further to so as to foot the bill for a program that would address cleaning the air? It is difficult to determine who should bear such costs...
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