Externalities and public goods are key concepts in microeconomics, helping to explain market failures and inefficiencies. Externalities occur when a third party is affected by an economic transaction, leading to positive or negative outcomes that aren’t reflected in market prices. Public goods, on the other hand, are non-excludable and non-rivalrous, meaning they are available to everyone without direct competition. This article delves into the economic impact of externalities and public goods, discussing their role in policy-making and market regulation.