Overview
Market failures occur when the free market fails to allocate resources efficiently, leading to negative outcomes for society. Common causes include externalities, public goods, monopolies, and information asymmetry. Understanding these failures is crucial for recognizing when government intervention...
Key Terms
Example: Pollution from a factory affecting nearby residents.
Example: National defense.
Example: Local utility company.
Example: Used car sales where the seller knows more about the car's condition than the buyer.
Example: Public parks used by people who do not contribute to their maintenance.
Example: Government subsidies for renewable energy.
Related Topics
Key Concepts
ExternalitiesPublic GoodsMonopoliesInformation Asymmetry