how do you define market failure? if i were to say that market failure refers to the free market being unable to achieve economic(allocative and productive) efficiency in the absence of govt intervention then for the case of income inequality, is it considered a market failure? (given that the market does allocate resources efficiently except that it isn’t a satisfactory allocation. :/
There is considerable agreement over the need for government to provide public goods. There is less agreement over the extent to which markets fail because of imperfect information.
a) Explain why markets fail in case of public goods and where information is imperfect. [10m]
Efficiency and equity are important concepts in Microeconomics. More specifically, they serve as pivots for policy-making. One instance in which these issues come up is in the age-old debate between nationalisation and privatisation. There is no clear consensus but economists can agree that going for either extreme tends to be a bad idea and would usually argue for a mix of regulation and privatisation.