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what is the difference between government failure and market failure? Are they related to each other? - sehgala_1999 - 03-07-2014 07:23 PM
Say if mixed goods were not efficiently distributed, would this be gov failure or market failure?
Thanks
- bully on speed - 03-07-2014 07:25 PM
government failure would be more like regulation failure
market failure is when one person decides to screw the system up. goods for services cannot fail. ok im a farmer this is whats required of me to get corn to you. im charging this much for my work. the market system corrupts this by applying value to speculation. how is it that i cannot see into the future but stock brokers can?
speculation breeds fear, fear drives prices
- chin - 03-07-2014 07:30 PM
Market mechanism will not always lead to an optimum allocation of resources, this is called market failure.
Government failure occurs when the government intervention leads to a net welfare loss rather than a net welfare gain. government intervention can be in many forms, taxes, subsidies, laws, rules n regulations... etc etc
Market failure happens when the market mechanism fails to allocate resources efficiently. the efficiencies are :
Social Efficiency
Allocative Efficiency
Technical Efficiency
Productive Efficiency
Market Failure occurs where:
Knowledge is not perfect - ignorance
Goods are differentiated
Resource immobility
Market power
Services/goods would or could not be provided in sufficient quantity by the market
Existence of external costs and benefits
Inequality exists