Market failure and the concept of inneficiency
- Created by: lizaloo98
- Created on: 11-04-16 10:02
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- Market failure and the concept of inneficiency
- market failure occurs when the free market mechanism fails to achieve economic efficiency
- information failure
- a lack of inforamtion resulting in consumers and producers making decisions that do not maximise welfare
- where consumers are not aware of the benefits and/or harmful effects of consuming a particular product
- where persuasive advertising results in consumption levels that are not in the best interest of consumers
- where the packaging is misleading
- individuals know litle about healthcare and the environment or insurance
- Asymmetric information
- information not equally shared between two parties
- e.g. doctors know more about your health problems than yourself
- producers know more about what is in a product than the consumer
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