Micro: 1.3.1 Types of market failure

Question 1

What is market failure?

Answer 1

Market failure is where too much or too little of a good is being produced and/or consumed compared with the socially optimal level of output, or when the price mechanism leads to an inefficient allocation of resources.

Question 2

What should students be introduced to regarding market failure?

Answer 2

Students should be introduced to examples of the different types of market failure.