Market Imperfection

Question 1

Provision of information

Answer 1

Ensures that economic units can maximise decisions when consuming and producing goods and service

Question 2

Where does the government provide info

Answer 2

If a private sector fails to do so e.g dangerous products, job market

Question 3

Information failure

Answer 3

Where consumers or producers do not have symmetric information but asymmetric info.
This means it is hard for producers to make decision on price leading to misallocation of resources

Question 4

Monopoly

Answer 4

When there is one producer in the market which means they have market power to set higher prices.
As a result, there will be misallocation of resources and allocative inefficiency, leading to market failure

Question 5

Factor immobility

Answer 5

Happebs when factors of production cannot be put to alternative uses. This means there will misallocation of resources , leading to market failure

Question 6

Labour immobility

Answer 6

Workers, labourers cannot be put to alterbative uses

Question 7

Why does labour immobility occur (1)

Answer 7

Geographical immobility→ workers in find it hard to move to different places
eg due to cost of living, imperfect info, don’t want to leave family n friends

Question 8

Why does labour immobility occur?(2)

Answer 8

Occupational immobility→ workers are not suitable for a different type of job e.g a butcher cannot easily work as a teacher

Question 9

Capital immobility

Answer 9

The capital, eg investment, machinery, is difficult to be put to an alternative use

Question 10

Why does capital immobility occur?(1)

Answer 10

Technological changes→ can make machinery obsolete(outdated), leads to cost for firm to update capital

Question 11

Why does capital immobility occur?(2)

Answer 11

Structural change in the economy→ as the types of industry changes, so does the capital euipment

Question 12

Land immobility

Answer 12

Land cannot be physically relocated

Question 13

Why does land immobility occur?

Answer 13

Cannot change the use of land:
Climate conditions mean certain crops cannot be grown eg grapes in uk
> the EU subsidises farmers to grow certain crops and continue to grow these

Question 14

What does it mean if factors are immobile?

Answer 14

Difficult to clear when there is a supply and demand
If demand ↑ but supply is fixed due to the immobilty, there is dostortion in market and take tine for market equilibrium to be reached