Market Failure

Question 1

What are markets

Answer 1

Decentralized collection of buyers and sellers whose interactions determine the allocation of goods and services via exchange

Question 2

3 major categories of property market

Answer 2

Space market
Development market
Asset / capital market

Question 3

What is the space market

Answer 3

Market for the usage of real property
Rent is determined by supply ( r.e owners who rent to tenants ) and demand( households, business talking to use it for productions or consumption)

Question 4

What is the asset market

Answer 4

Market for ownership of real property
Subset of capital market

Question 5

What is the development market

Answer 5

In the short term cashflow and benefits determine the price of the current property.value in the asset market
- In the long / medium term it convert entrepreneurial and financial capital in to physical capital thereby governing stock supply

Question 6

Discuss the invisible hand?m

Answer 6

Economic activity is determined by prices these prices determine demand and supply it allocated prices so equilibrium is reached allowing b and S to unknowingly fulfill the needs of all participants and maschise the well being of society

Question 7

What is Pareto optimality

Answer 7

• For microeconomic Efficiency there should be no way of making one person better off without making someone else worse off
• ## only possible when allocative and productive efficiency is reached

Question 8

What is market failure

Answer 8

• is an equilibrium allocation of resources is not Pareto optimal
• access when MSc is not equal to M.S. B meaning prices do not reflect social cost incurred during production thus leading to over or under production of a good

Question 9

Why do markets fail

Answer 9

Structural imperfections like
- information asymmetry - fraud
- externalities - noise, pollution traffic-
- monopolies- high prices
- imperfect competition
- business cycle - booms and busts 

Question 10

Addressing market failure via direct government intervention

Answer 10

Participation of government in the economy
- gv becoming buyer or seller
- property development

Question 11

What are indirect government interventions? 

Answer 11

• Exercise of fiscal and monetary policy
• exercise of regulatory function - planning policies regulation

Question 12

What are indirect government interventions? 

Answer 12

• Exercise of fiscal and monetary policy
• exercise of regulatory function - planning policies regulation