Negative externalities are the negative side-effects of a product on a third-party or on the economy . In other words, the economy or society is paying more than what the consumer is paying for the goods. In most cases, they are usually the environmental side effects of the product produced by the company. In this case, the negative externalities include the product demand by a customer which leads to increase in the price of the product which will definitely affect the demands of other customers, the environmental pollution that results from the electricity consumption of the company, e.t.c. In finding solutions to negative externalities, government regulations are of utmost importance.
The solutions usually come in the form of taxes and subsidies that will cushion the effects of negative externalities, environmental protection laws, e.t.c (Bakare, Daisi and Fashina p. 46). Government regulations are not always needed to solve the problem of negative externalities but they do play a vital role. Potential unintended consequences usually arise as a result of the negative externalities and are typically not anticipated to occur by either the producer or the consumer and when they do occur, they are less beneficial to both parties.