Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.
What is Market Failure?
- In economics, market failure is a situation in which the allocation of goods and services is not efficient. Efficiency in resource allocation implies what is desired by the society is produced and marketed at a price that reflect the cost of their production.
- In the case of market failure, what is desirable for the society’s view point is not produced or the concerned goods are underpriced or overproduced. This is why market failure is interpreted as a case of the misallocation of resources.
Market failure in the case of environment
- An important example for market failure is the underpricing of some goods that causes heavy environmental degradation. Here, the market mechanism is not able to take all costs and benefits related to an economic activity in the price of the product.
- For example, in the case of sand mining from rivers, sand price doesn’t reflect the injury created to the river. Similarly, some of the fuel like diesel that contributed to pollution were given at a subsidized price in the past. As these goods are low priced compared to the cost incurred to the society, their consumption also goes up.
- Market failure results due to self-interest driven consumption/production activities by individuals.
- There are different situations that create market failure. Market failure can occur due to a variety of reasons, such as monopoly (price is high while production is low), negative externalities (commodity’s production creates adverse effect on others and it is over consumed) and subsidized/public goods (usually not reflecting the free market price).
- Contact us for:-RBI GradeB/NABARD/SEBI coaching in Dehradun (Uttarakhand), Current Affairs classes in Dehradun (Uttarakhand), For best guidance and study material call 7088873675, 9997453844
Latest posts by Hemant Bhatt (see all)
- UKPSC RO ARO 2023 Prelims Test Series || ORACLE IAS - September 24, 2023
- UKPSC RO-ARO study material(2023) Prelims - September 24, 2023
- उत्तराखण्ड समीक्षा अधिकारी/सहायक समीक्षा अधिकारी परीक्षा 2023 - September 9, 2023