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Printable Handouts
Navigable Slide Index
- Introduction
- What is market failure?
- The nature of market failure
- Social efficiency and pareto efficiency
- Types of market failure - lack of competition
- Types of market failure - labour market failure
- Types of market failure - unstable commodity prices
- Types of market failure - externalities
- Types of market failure - missing markets
- Types of market failure - asymmetric information
- Production and its external costs
- Production and its external benefits
- Consumption and its external costs
- Consumption and its external benefits
- Monopoly as a market failure
- Deadweight loss under monopoly (1)
- Deadweight loss under monopoly (2)
- Thank you
This material is restricted to subscribers.
Topics Covered
- Market failure
- Social efficiency
- Pareto efficiency
- Deadweight loss
- Consumer surplus
- Producer surplus
- Market competition
- Labour market failure
- Unstable commodity prices
- Externalities
- Asymmetric information
Talk Citation
Ramesh, S. (2019, October 31). Market failure [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved December 5, 2024, from https://doi.org/10.69645/EDQF1825.Export Citation (RIS)
Publication History
Other Talks in the Series: Introduction to Microeconomics
Transcript
Please wait while the transcript is being prepared...
0:00
Hi, I'm Dr. Sangaralingam Ramesh.
Welcome to talk number 13 in
this Henry Stewart Talks series: Introduction to Microeconomics.
In this talk, we'll be discussing and analyzing market failure.
0:14
So what is market failure?
Market failure results when
a free market fails to deliver an efficient allocation of resources.
In other words, where supply meets demand,
the allocation of resources is not efficient.
This may result in a loss of economic and social welfare where
the social costs are greater than the cost to the firm.
We can also say that market failure occurs when
the outcome of the market does not meet society's needs.
0:47
So in the context of the nature of market failure,
this can be analyzed using
a demand curve and a supply curve which can be seen in this diagram,
where we have price and costs on the vertical y-axis
and the quantity of output on the horizontal x-axis.
We have the upward sloping market supply curve which can be
derived from each individual firm's marginal cost curve,
which is part of the firm's marginal cost curve,
which is above its minimum average cost.
By adding together each part of the module cost curve of each firm,
which is above the minimum average cost,
we get the market supply curve.
The market demand curve is downward sloping and this can be
derived from the individual firm's marginal benefit curve.
Where these two curves meet, demand and supply,
we have the equilibrium price,
Pe, and equilibrium quantity, Qe.
However, although this represents market equilibrium,
it may not be in society's interests that the firm may be either
producing too much of the quantity of
the good Q or too little of the quantity of the good Q.
So in this case,
where society's needs are not matched by those of the market,
we say that there is market failure.