Market failure and the concept of inneficiency

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  • 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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