Economics Market Economy Questions
Market failure refers to a situation in a market economy where the allocation of goods and services by the market mechanism is inefficient or fails to achieve the optimal outcome. It occurs when the market fails to allocate resources in a way that maximizes social welfare or when the market does not produce the socially desirable quantity or quality of goods and services. Market failures can arise due to various reasons such as externalities, public goods, imperfect competition, information asymmetry, and income inequality. In such cases, government intervention or regulation may be necessary to correct the market failure and ensure a more efficient allocation of resources.