MARKETS and MARKET FAILURE



MARKET FAILURE

Define market failure:

Give examples of the market functioning inefficiently:

How are markets supposed to perform? Explain these functions (SIR):

|Signalling |Incentives |Rationing |

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List the different forms of market failure and explain each one:

P

E

M

M

I

I

I

EXTERNALITIES

Private + External = Social

Externalities are

| |Private |External |Social |

| |Costs |Benefits |

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|Excludability | | |

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|Rivalry | | |

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|Rejectability | | |

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Give some examples of public goods.

Why will the market fail to provide public goods?

Can a city survive without public goods?

Explain why TV broadcasting might be classified as a public good and explain why TV broadcasting can also have some characteristics of a private good.

What role has technological change played in this?

What is meant by a quasi public good?

Explain how imperfect and asymmetric information can lead to market

failure.

Assymetric information

Explain how the existence of monopoly and monopoly power can lead to

market failure.

Explain how the immobility of factors of production can lead to market failure.

Explain why the market system results in an unequal and inequitable distribution of income.

How does this lead to market failure?

Case Study - Market Failure in the UK Housing Market

UK Housing Market Rising House Prices Supply of housing

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