Business Dictionary
Market Failure
A-B C-D E-G H-K L-N O-P R-S T-W
Market Failure is the term that describes situation where outcomes of the market are not Pareto efficient. Market failure can be the reason for government intervention. There are many causes for market failure.
Market power or absence of perfect competition is the reason for market failure.
Another cause of market failure is the existence of externality. Negative externality arise when the company does not take the costs of damage that it do ( pollution ). Positive externality is the case when the company is taking benefits that are not entitled to.
Finally, the market failure may occur in case that products or services are not supplied, or are supplied in limited quantities.
Related Reading:
Market
Market Power
Pareto Efficiency
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