The Reasons for Market Failures (Grade 12 NSC Matric Economics): Flashcards
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Practise the cards
10 cards from this deck
Market failure
Market failure
Free market fails to allocate resources efficiently
Externalities
Externalities
Costs/benefits not fully reflected in market prices
Social costs
Social costs
Total cost to society (private + external costs)
Negative externalities market effect
Negative externalities market effect
Overproduction of goods with harmful effects
Positive externalities market effect
Positive externalities market effect
Underproduction of beneficial goods
Non-rivalry (public goods)
Non-rivalry (public goods)
One person's use doesn't reduce availability for others
Non-excludability (public goods)
Non-excludability (public goods)
Can't prevent non-payers from using the good
Merit goods
Merit goods
Beneficial goods under-consumed without intervention
Demerit goods
Demerit goods
Harmful goods over-produced by market
Barriers to entry
Barriers to entry
Factors preventing new businesses entering market