Does the transaction of a buyer and seller directly affect a third party in home building? Is the effect a negative or positive externality in home building? Explain.
Say you have an empty lot next to your house. The empty lot looks terrible because nobody is taking care of the lawn, garbage seems to accumulate, etc.
Somebody buys the lot to build a house. Are you happy, sad, or indifferent?
Now, you find your new neighbors have a drummer who likes to practice at 2am. Are you happy, sad, or indifferent?
The transaction of a buyer and seller in home building can indeed have an effect on third parties, which can be categorized as either a negative or positive externality.
In the first scenario, when someone buys the empty lot next to your house to build a house, the effect on you as a neighbor may vary. If the lot was previously neglected, as you mentioned with an overgrown lawn and accumulating garbage, the buyer building a house can be seen as a positive externality for you. It improves the overall appearance of the neighborhood and potentially enhances property values. Therefore, you might feel happy or positive about the situation.
In the second scenario, if your new neighbors have a drummer who practices at 2am, this can be seen as a negative externality. The noise disturbance could disrupt your sleep and general peace and quiet. In this case, you might feel sad or negative about the situation.
To answer your specific question:
Regarding the buyer building a house on the empty lot, you would likely be happy or pleased due to the positive externality created by the improved appearance of the neighborhood.
Regarding the neighbors practicing drums at 2am, you would likely be sad or annoyed due to the negative externality created by the noise disturbance.
In general, the impact of a buyer-seller transaction in home building can have different effects on third parties depending on the specific circumstances. It is important to consider both positive and negative externalities to fully assess the overall outcome.