ECO-Market failure, page num 103 #eco #Marketfailure

What is market failure:

Market failure occurs when the allocation of goods and services by a free market is inefficient, leading to a net loss in societal welfare. This happens when the forces of supply and demand do not lead to optimal outcomes for society, causing negative effects that the market alone cannot correct. Market failure can take many forms, including externalities, public goods, imperfect information, and monopoly power. For example, in a free market the following situations may arise:

• Education and healthcare services are only provided to those who are willing and able to pay, despite the benefits these bring to society as a whole.

• Street lighting and public roads are underprovided as producers cannot exclude those who do not pay from benefits from the provision of these services.

• Tobacco, alcohol and gambling are overprovided as there is a lack of government intervention to regulate production and consumption levels in these markets.

• Extraction of oil and the construction of office buildings cause damage to the physical environment and loss of green space.

• Monopolies can abuse their market power, charging customers higher prices or supplying lower quantiles than if they were faced with competition.

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