Principles of Microeconomics / Unit 11 MIC 1005 short lesson, about 20 seconds
Market Failure
Captions available
The idea
Market failure is a market that, left alone, does not allocate resources efficiently. An externality is one cause: the supply curve omits a cost, so price equals the wrong marginal cost and the quantity is wrong.
In practice
The paint market is competitive and still overproduces.
Where people slip
The failure is in the property rights: nobody owns the river, so nobody can charge for damaging it.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it