MICRO Aims: 3. Correcting Market Failure

Question 1

What is MARKET FAILURE?

Explain reasons for Government intervention in mixed market economies to allocate resources.

Answer 1

Question 2

Explain why the government intervenes to provide MERIT goods

Answer 2

Question 3

Explain types of MARKET FAILURE.

Disadvantages of a FREE MARKET ECONOMY

Problems with the PRICE MECHANISM

Reasons for GOVERNMENT INTERVENTION

Answer 3

Question 4

FISCAL POLICIES (Demand-Side Policies) to correct Market Failure

Answer 4

Question 5

MONETARY POLICIES (Demand-Side Policies) to correct Market Failure

Answer 5

INTEREST RATES - can’t think of any policies

Question 6

SUPPLY SIDE POLICIES to correct Market Failures.

Explain ways a government intervenes to correct or reduce market failure.

Answer 6