Video narration
How can a deal that suits buyer and seller still leave a cost for people outside it? Think of a busy road. Drivers pay for fuel and focus on their trips, while nearby people bear some exhaust and noise the deal doesn't account for. That's an externality: a cost or benefit affecting someone outside the deal. The problem isn't that nobody made a deal. It's that the price can leave out effects the people making it don't bear. Markets can miss the mark in other ways. Weak competition gives companies less pressure to serve buyers well, while missing information can lead to poor choices. That's market failure: a market outcome that uses resources less well than it could. So why can a willing deal still leave a wider cost? Because prices can miss costs or benefits, or competition can be weak.