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3401741
Market Failure
Description
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No tags specified
market failure
mind map
explanation
Mind Map by
Grace Frances
, updated more than 1 year ago
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Created by
Grace Frances
almost 9 years ago
298
1
0
Resource summary
Market Failure
Externalities
Merit Goods
In a Free market system, they tend to be Underconsumed/underproduced
How to encourage the consumption/production of merit goods?
Subsidise the merit goods
Tax incentive
Public Campaign
e.g.
vaccines
medicine
External benefits when they are consumed/produced
Demerit Goods
They tend to be overconsumed/overproduced
How to discourage the consumption/production of demerit goods?
Impose indirect taxes on those goods
Prohibition and laws
e.g.
alcohol
external costs
External costs when they are consumed/produced
Public Goods
No one is willing to provide public goods in a market economy due to its non-rivalry/excludable nature.
Failure in the economy in the allocation of resources
Information Failures
Moral Hazard
When a customer is misinformed from a more informed supplier so the consumers can the wrong choices - misallocation of resources
Can be helped by placing regulations
Adverse selection
Suppliers/producers are misinformed and makes the wrong choice - misallocation of resources
Imperfect Competition
Monopolies might occur and would set the price . Customers would suffer from this high price
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