18-Market Failure

Question 1

Define Market Failure

Answer 1

Market Failure occurs when the Price Mechanism Fails to Allocate Resources Efficiently, thus leading to a Net Welfare Loss for the Society

Question 2

Outline the Reasons For Market Failure

Answer 2

–> Externalities
–> Non-Provision of Public Goods
–> Imperfect Information
–> Moral Hazard
–> Speculation & Market Bubble