Write an explanatory notes on market failure
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PART OF
Practical Look At Microeconomics
ECONOMY ECONOMICS
Market Failure
By THE INVESTOPEDIA TEAM
Reviewed by MICHAEL J BOYLE on April 06, 2020
What is Market Failure?
Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.
In other words, each individual makes the correct decision for him or herself, but those prove to be the wrong decisions for the group. In traditional microeconomics, this can sometimes be shown as a steady-state disequilibrium in which the quantity supplied does not equal the quantity demanded.
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