Description of two Forms of Market Failure

Post a 150- to 225-word (2- to 3-paragraph) description of two forms of market failure
you identified. In your description, address the following:
● What are the causes of the market failure?
Market failure is defined as a situation where there lack of sufficient distribution of
resources. Market failure is a result of the price mechanism failing to take into account the costs
of a good or service. With a market failure, there is not the optimal social amount of goods in
supply (Jackson & Jabbie, 2019). Disequilibrium in the market exists as a result of price
distortion. Causes of market failures include externalities, public goods, the lack of information
in the market, and abuse of monopoly power.
● Explain whether or not government regulation is involved in correcting the
market failures, and share your views on the success of the intervention.
Market failures can be corrected through government intervention. The government can
introduce certain regulations that aim to change behavior (Jackson & Jabbie, 2019). Through
certain legislation, the government can get rid of certain unwanted behaviors. An
example is coming up with legislation that bans smoking or makes it mandatory for a parent to
take their children to school. Another way that government can solve market failure is through
taxation (Jackson & Jabbie, 2019). Taxes can help in the discouragement of consumption of
certain goods and services. An example is placing taxes on cigarettes. The government can also
offer subsidies and, in so doing reduce the price of certain goods and services. Government
intervention can achieve success in reducing inefficiencies in the market.

References

Jackson, E. A., & Jabbie, M. (2019). Understanding market failure in the developing country
context. In Decent Work and Economic Growth: Encyclopedia of Sustainable
Development Goals (pp. 1-10). Cham: Springer Nature Switzerland.