Market failure table

Question 1

Factor immobility (occupational or geographical)

Answer 1

Consequence - Structural unemployment

Intervention - State investment in education and training

Question 2

Public goods

Answer 2

Consequence - Failure of market to provide pure public goods, free rider problem
Intervention - Government funded public goods for collective consumption

Question 3

Demerit goods

Answer 3

Consequence - Over consumption of products with negative externalities
Intervention - Information campaigns, minimum age for consumption, taxation

Question 4

Merit goods

Answer 4

Consequence - Under consumption of products with positive externalities
Intervention - Subsidies, information on private benefits

Question 5

Imperfect information

Answer 5

Consequence - Damaging consequences for consumers from poor choices
Intervention - Statutory information / labeling

Question 6

High relative poverty

Answer 6

Consequence - Low income families suffer social exclusion, negative externalities
Intervention - Taxation and welfare to redistribute income and wealth

Question 7

Monopoly power in a market

Answer 7

Consequence - Higher prices for consumers causes loss of allocative efficiency
Interventoon - Competition policy, measures to encourage new firms into a market