What is a market failure, and what kinds of things can lead to market failure?

When the price structure of the product fails to meet the requirements after the consumption of the goods, there must be situation of market failure. This situation could happen due to deficiency in the utilization of resources in production. There must be some factors which could cause market failure such as:

·         Positive and negative externalities

·         Environmental concerns

·         Lack of public goods

·         Lack of production of merit goods

·         Abuse monopoly situation

 What is government failure?

Government failure is termed as a situation when government intervention in the country’s economy which increases the efficiency to utilize the resources perfectly.

 Can the government Does failure lead to market failure?

The government intervention is most likely to market failures, which leads to the failure of the utilization of resources. While government failure is a situation where government deals with the efficiency of utilization of scarce resources. There are many policies of the government that can cause market failures such as tax policies and price strategies.

Review concepts like shortsightedness and rent-seeking.  What are the effects of government intervention in markets with some of the price regulations like price floors and price ceilings we discussed in chapter 4?

Governments frequently try to help ranchers by setting value floors in horticultural markets. A passable base value set over the harmony cost is a value floor. With a value floor, the administration precludes a cost underneath the base. A price floor that is set over the harmony cost makes an overflow while the price ceiling is price set by the government which is above the equilibrium price. Rent control is a case of price ceiling, the greatest permissible cost. With a price ceiling, the administration precludes a cost over the most extreme. A price ceiling that is set underneath the harmony cost makes a lack that will endure.