The Causes And Cons Of Market Failure

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‘Market failure occurs when there are too few markets, non-competitive behavior, or non-existence, leading to inefficient allocations.’ (Ledyard, 2008.) Market failure describes a situation where resources cannot be efficiently allocated to get the greatest possible consumer satisfaction. That’s due to the breakdown of price mechanism caused by factors such as establishment of monopolies. And government intervene in the economy to allocate resources as a result of market failure. • Merit goods Merit goods are those benefit to consumers but their value cannot be fully realized at the time of consumption. And the consuming of merit goods is beneficial to other individuals and society, the benefit cannot be realized, too. One of the well-known merit goods is education, individuals pay for tuition to study at school, study for years and then using what they learned in school to look for jobs, to earn more money, and to make contribution to society. Government provide merit goods because individuals cannot fully realize the importance of merit goods or they are unable to pay for these which lead to insufficient supply and demand of merit goods. • Public goods Public goods are products can be consumed by all individuals and the consuming of one individual will not reduce its availability to another individual, these goods are considered nonrivalrous and nonexcludable. The public parks are public goods build by government, individuals can visit and enjoy them equally

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