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8.5.3 Market Failure
Pareto’s optimality could only be achieved in a perfect market which does not exist in real world. The real markets do not achieve pareto optimality and so we say they experience market failure. Market failure occurs when resources are misallocated or allocated inefficiently. It arises because exchange is impeded .It leads to waste or lost value. Four important causes are identified for the market failure: i) Imperfect market structure ( monopoly, monopolistic competition , oligopoly, etc) ii) Existence of public goods iii) Presence of external costs and benefits and iv) Imperfect information |
Last modified: Saturday, 24 December 2011, 7:11 AM