SECTION 1 MANAGING THE ECONOMY Market Failure The economy at work GCSE ECONOMICS: UNIT 12

SECTION 1 MANAGING THE ECONOMY Lesson Objectives Understand what is meant by market failure Produce a short 5 minute lesson on one of the types of market failure

SECTION 1 MANAGING THE ECONOMY Market Failure In todays lesson we will be looking at Market Failure Before understanding how a market fails its important you know what a market is! Write down your own definition of a market

SECTION 1 MANAGING THE ECONOMY What is a market? A market is a place where buyers and sellers come together to conduct a transaction together Markets left to operate freely have a good chance of operating efficiently By operating efficiently, business costs can be kept low in order to improve profits In this way, the market ensures that the resources are allocated efficiently

SECTION 1 MANAGING THE ECONOMY What is market failure? Market failure occurs when markets fail to allocate resources efficiently This means the prices of goods and the quantities produced are not at the level that ensures that economic welfare is kept as high as possible For example, if a market fails, some goods may be under-produced or not even produced at all

SECTION 1 MANAGING THE ECONOMY Types of market failure There are a number of different types of market failure, such as: – Merit goods/De-merit goods – Public goods – Imperfect competition e.g. monopoly – Positive externalities/ Negative externalities – Unequal distribution or income/wealth – Immobility of factors of production (e.g. immobility of labour)

SECTION 1 MANAGING THE ECONOMY Types of market failure: Over to you You have 15 minutes to research your chosen type of market failure Produce a handout which includes the following; – a clear definition of your type of market failure – an explanation as to why it occurs – examples of your type of market failure in the real world You will present your findings to the other groups

SECTION 1 MANAGING THE ECONOMY Match the keyword to the expression which fits best Market Failure Non-rival Non-excludable Free-rider Too much or too little, but never just enough There is enough for everyone You cant stop me You buy it….no you buy it!

SECTION 1 MANAGING THE ECONOMY What do you see?

SECTION 1 MANAGING THE ECONOMY What do you see?

SECTION 1 MANAGING THE ECONOMY What do you see?

SECTION 1 MANAGING THE ECONOMY What do you see?