MYTUTOR SUBJECT ANSWERS

468 views

What is market failure?

The term market failure describes the failure of the market system to allocate resources effectively. It takes place when the quantity of a product demanded by consumers is not equal to the quantity supplied by suppliers, meaning that the market fails to reach equilibrium. 

In order for resources to be allocated efficiently, the social marginal costs (SMC) should be equal to the social marginal benefits (SMB). 

Market failure can occur due to various reasons such as: 

- Immobility of labour: geographical and occupational immobility
- Public goods: goods that are non-rival (consumption by an individual does not limit consumption by others) and non-excludable (cannot prevent anyone from consuming it) such as street lighting 
- Asymmetric information: when there is lack of information by a party in a transaction 
-Externalities:negative externalities (costs to third parties such as pollution) and positive externalities (benefits to third parties such as education can help the society)
-Monopoly power: when a firm controls the market and is able to set high prices 
-Commodity price instability
 

Angeliki H. A Level Economics tutor, GCSE Economics tutor

10 months ago

Answered by Angeliki, an A Level Economics tutor with MyTutor


Still stuck? Get one-to-one help from a personally interviewed subject specialist

60 SUBJECT SPECIALISTS

PremiumWilliam A. A Level Law tutor, GCSE Law tutor, A Level Economics tutor...
£36 /hr

William A.

Degree: Law (Bachelors) - Cambridge alumni University

Subjects offered:Economics, Maths+ 3 more

Economics
Maths
Law
Chemistry
.LNAT.

“I recently graduated from the University of Cambridge in Law and completed my A Levels in 2012 with 4 A*s in Maths, Economics, Physics and Chemistry.I am a friendly and approachable person and have previously tutored A Level Econom...”

£22 /hr

Ellen T.

Degree: Economics (Bachelors) - LSE University

Subjects offered:Economics, Physics+ 2 more

Economics
Physics
Maths
-Personal Statements-

“Hi! I study Economics at LSE. With previous tutoring experience, I am keen to provide genuine advice and create an engaging learning environment. ”

£30 /hr

Gina J.

Degree: Economics with French (Bachelors) - Bristol University

Subjects offered:Economics, Spanish+ 2 more

Economics
Spanish
Maths
French

“Private tutor of Economics, Maths and French with six years of experience. I am passionate about teaching!”

About the author

Angeliki H.

Currently unavailable: for new students

Degree: Economics (Bachelors) - Bristol University

Subjects offered:Economics, Maths

Economics
Maths

“Hi, I am Angeliki! I am an economics student at the University of Bristol. Economics have always been my passion. Through my tutorials I will be able to pass my love and excitement about the subject to my students making it more inter...”

MyTutor guarantee

You may also like...

Posts by Angeliki

What are tariffs?

What is market failure?

Other A Level Economics questions

What is inflation?

Analyse two economic benefits of globalisation. [6]

What is the Price Elasticity of Demand when price increases from £1 to £2 and the quantity demanded falls from 300 to 200. Describe the value found.

What factors cause the aggregate demand curve to shift?

View A Level Economics tutors

We use cookies to improve your site experience. By continuing to use this website, we'll assume that you're OK with this. Dismiss

mtw:mercury1:status:ok