Market Failure

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  • Created by: Em
  • Created on: 19-03-16 05:14

Market Failure

  • When the allocation of resources is inefficient 


  • The production of socially desirable goods/services doesn't meet demand

The overproduction of socially undersirable goods/services

  • Socially undesirable goods/services include illegal drugs, prostitution, guns, pollution etc. 
  • These have a negative effect on families and communities (they are negative externalities)

The underproduction of socially desirable goods/services

  • An example of a socially desirable good/service is public healthcare
  • These 'public' and socially desirable goods/services are actually produced/owned by private sectors (businesses)
  • They are underproduced because the private sectors can't sell them at a profitable price
  • These…


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