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Market Failure (Reasons (Information failure, Missing markets, Factor…
Market Failure
Reasons
Information failure
Missing markets
Factor immobility
Externalities
Inequality
Lack of competition in a market
Firms which dominate their market will attempt to charge high prices in order to make the greatest profit. This is called
imperfect competition
productive inefficiency
trade unions may push up costs to firms if they are successful in getting higher wages for their members than the market rate
allocative inefficiency
denying customers the ability to buy as much as they would have done if the market had been competitive
Types
Complete market failure
This is when the markets fail to lead any production of good or services
This leads to a
missing market
Partial market failure
This is when the market exists but there is overproduction or underproduction of goods
Market failure
occurs when markets lead to an inefficient allocation of resources