The Economy Around You — When private choices spill onto everyone else.
An externality is a cost or benefit of an action that falls on people not directly involved, like pollution harming a community or a vaccine protecting others.
Tragedy of the commons: A shared resource gets overused because each person gains fully while the cost is spread to all, depleting it for everyone.
Public goods, like clean air or street lighting, are hard to charge for, so markets tend to underprovide them.
A tax can make a polluter pay for the harm it causes, discouraging the activity and reflecting its true cost to society.
12 practice questions with explanations. Free, and no account is needed to start.