How does poverty and inequality cause market failure?

[Retroabc]

I am doing a presentation about market failure and i would just like to know about 5 or 6 key points as to how poverty and inequality cause market failure thanks xxx

[Happy2Help]

Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient.

With inequality, markets can generate an ‘unacceptable’ distribution of income and consequent social exclusion which will cause allocative inefficiency. In simpler terms, the goods and services that would best benefit society are not made because some people's wants aren't registering.

[Cookie]

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[Mister T]

Think of Detroit.... in the 70's Detroit was one of the most productive places on Earth....now the rate of unemployment is skyrocketing, the housing market is the worse in the US, and crime and corruption prevent new industries from moving back into the area. Once Detroit failed, you saw a spiderweb of other nearby towns and cities struggle to hang onto the businesses that keep the metropolitan areas alive. You can find a lot of information on the downfall of Detroit and how the poverty of that area has caused residual effects. All of the employable base of workers left, while the uneducated blue collar workers were stranded there without much hope. Salary baselines went from 60k to under 20k within a few years. The housing market in Detroit has been so devestated that the average median home price can't climb to anything of value to re-establish or jumpstart new housing investments.

[DoILiveInOz]

I would not call inequality a market failure. Inequality is needed in a market to motivate people. The alternative is to use coercion and force. Millions were murdered under communism which apposed free markets and sold itself as a system of equality, which it never was in real life. The problem is always a lack of a free market because of too much government "failure" in real life.