#Economics #MarketFailure #Market
Market failure occurs when the production/consumption affects additional positive or negative effect to third party which isn't involved in a economic activity
Market failure usually occurs when the demand and supply fail to allocate a product efficiently
Example : Education and health care service are only provided those who are willing to pay, despite to bring the society as a whole
Example 2 : Monopolists can abuse their market power, charging customers higher prices or supplying lower quantities than if they were faced with competition.
Private Cost And Social Cost
Private Cost -: Private cost of a production or a consumption costs of an individual firm, the production or a consumption of products that has no effect on third party are called private cost, private cost = social cost - external cost
Social Cost -: Social cost is caused when a third person is involved in a transaction of 2, basically social cost = external cost + private cost
External Cost -: External cost is the negative impact caused from a production, example - factory producing bad gases, formula of external cost : social cost - private cost
Social Benefit And Private Benefit
Private Benefit
Private Benefit is the benefit obtained by a individual firm from allocating or consuming resources
External Benefits
Social Benefit
https://youtu.be/13JOGWzY8kE?si=MC0JdAKHenYLCHBd
What role do government interventions play in correcting market failures?
How can monopoly power lead to market failure?
What are the potential drawbacks of government intervention in markets?
Discuss the impact of market failure on economic welfare.
How does information asymmetry contribute to market failure?