ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The failure of private decisions in the marketplace to achieve an efficient allocation of scarce resources is called market failure.

Detailed explanation-2: -Market failure, in economics, is a situation defined by an inefficient distribution of goods and services in the free market.

Detailed explanation-3: -The main types of market failure include asymmetric information, concentrated market power, public goods and externalities.

Detailed explanation-4: -There are four probable causes of market failures; power abuse (a monopoly or monopsony, the sole buyer of a factor of production), improper or incomplete distribution of information, externalities and public goods.

Detailed explanation-5: -In either case market failures generate productive and/or allocative inefficiency. This means that the market system has failed to deliver on what its advocates claim it does best… fully allocate resources efficiently.