From the 1.4 - Government
specification... Intervention
, Market failure is a situation
where the free market
mechanism does not lead to
Recap: an optimal/efficient allocation
of resources and the needs
Market and wants of societies are
not met. As a result, too much
Failure or too little of a product can be
produced, leading to a
net welfare loss (society is
worse off).
, Recap: Government intervention in
markets
In a free market system, governments believe that markets themselves s
be able to allocate scarce resources and allow market forces of supply an
demand to set the prices and the subsequent quantity produced and
consumed.
However, markets sometimes fail to allocate societies scarce resources
effectively (market failure), requiring governments to intervene in order t
allocate resources efficiently in order to tackle the basic economic proble
This happens in a mixed economy.
This can take the form of:
• Indirect taxes - week 8 work
• Subsidies - week 9 work
• Maximum and minimum prices - this week’s focus
• Pollution Permits
• State provision of public goods
• Provision of Information
• Regulation
specification... Intervention
, Market failure is a situation
where the free market
mechanism does not lead to
Recap: an optimal/efficient allocation
of resources and the needs
Market and wants of societies are
not met. As a result, too much
Failure or too little of a product can be
produced, leading to a
net welfare loss (society is
worse off).
, Recap: Government intervention in
markets
In a free market system, governments believe that markets themselves s
be able to allocate scarce resources and allow market forces of supply an
demand to set the prices and the subsequent quantity produced and
consumed.
However, markets sometimes fail to allocate societies scarce resources
effectively (market failure), requiring governments to intervene in order t
allocate resources efficiently in order to tackle the basic economic proble
This happens in a mixed economy.
This can take the form of:
• Indirect taxes - week 8 work
• Subsidies - week 9 work
• Maximum and minimum prices - this week’s focus
• Pollution Permits
• State provision of public goods
• Provision of Information
• Regulation
