what is market failure? (1 Viewer)

[Hei]

i don't understand the concept of market failure.

 

[astroman]

http://lmgtfy.com/?q=what+is+market+failure

 

[enigma_1]

This is in terms of the environment. So when private production/activity takes place, it only accounts for the Marginal private cost (the cost the business will need to pay for the production activity to occur) but it does NOT account for the marginal social cost that people (the unconsenting third party) will have to face (eg polluting the air is a social cost imposed on an unconsenting 3rd party).

This is an example of market failure because there are no separate private property rights associated with the use/exploitation of the environment. Private property rights have 3 features: they are excludable, transferable (can be bought and sold) and are enforceable (legally) whereas environmental resources do not have these since the price mechanism fails to take into account the negative externalities of exploiting environmental resources, so it's market failure.

http://lmgtfy.com/?q=what+is+market+failure

lol

 

[mreditor16]

OP, take a look at the relevant section in your textbook. That would be a good place to start.

 

[faisalabdul16]

It's when the market fails

 

[enigma_1]

It's when the market fails

10/10

band 7

 

[swagmeister]

It's a big thing in the prelim course, where we look at it as more than related to the environment.

This is from my revision prelim notes, hope it helps to some extent:

Market failure is when the market fails to take into account the social costs of production as well as the private costs. In general this could be cause there is a negative externality (e.g. pollution) however it could also be when the market fails to take into account a positive externality (e.g. benefits arising from education)


^This diagram shows a negative externality

Also these are some of the government intervention strategies as a result of market failure:

Problem: Government Action - Outcome
Market Price to high: Price ceiling - Reduces price, quantity shortage (disequilbrium)
Market price to low: Price floor - Increase price, quantity excess (disequilibirum)
Market quantity too high (negative externalities): Taxes - Increase equilibrium price, reduces equilibrium quantity
Market quantity too low (positive externalities): Subsides - Reduces equilibrium price, increases equilibrium quantity
Market does not provide a good or service (public goods): Government provides good or service - Government must collect taxation revenue to finance its supply of public goods

 

[seventhroot]

It's when the market fails

sounds like something I would say lel

we're gonna state rank together

 

[Queenroot]

It's when the market fails

Hahaha fuck wasn't inb4