Market Analysis : Market Failure

1246 WordsJan 8, 20175 Pages
Market failure: Market failure is the market cannot efficiently allocate goods and services. Only completely competition market mechanism is the most efficient market mechanism, in addition to this, others are all included in market failure. And in actuality, because of various of factors, it cannot obtain the completely competition market mechanism and produce the loss of efficiency (MacKenzie, 2002). Merit goods: Merit goods are the government feels that people will under-consume, and which ought to be subsidized or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service (Musgrave, 2002). For examples, healthcare is the example of merit good. Governments provide merit…show more content…
Imperfect competition refers to a competitive market, there are many sellers but they sell different goods on imperfect market competition scene. As the name suggests, the competitive market, in essence is not perfect (Mackenzie, 2002). Governments have to master the control of imperfect competition, because there are always some buyers have big and inevitable ability, it can affect and disrupt the market price. These buyers will lead to monopoly. If a monopoly behavior occurs, it will lead to big trouble. So the government needs to control monopoly (Mankiw, 2012). Externalities: An externality is a consequence of an economic activity experienced by unrelated third parties; it can be either positive or negative (Mankiw, 2012). For example, pollution emitted is a negative externality. The government have to make the external reasons, including changing incentives, and external effects for people to consider their behaviors. The government can make externally imposed a tax on producers’ equilibrium quantity to decrease the market supply. Role of government are expected to let the negative externality into directly linked to economic activity, such as fines and forced to increase equipment. In today 's society is in rapid development trend, in the final analysis is the further deepening of high-tech industries. The problem between environment and

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