Market Failure Flashcards
1
Q
Market failure
A
Market failure is when the price mechanism leads to an inefficient allocation of resources and a deadweight loss of economic welfare.
- resources are not allocated efficiently as they could be
2
Q
Markets can fail for a lot of reasons:
A
- Negative externalities
- Positive externalities
- Imperfect information/ information failure
- Factor immobility
- Equity (fairness) issues
- Marker dominance by monopolies
- Private sector failure
3
Q
Complete market failure
A
Occurs when the market does not supply products at all - there is a missing market
4
Q
Partial market failure
A
Occurs when the market functions/ exists, but it supplies the wrong quantity of a product
