• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Market Failure

Extracts from this document...


MARKET FAILURE Merit goods are the physical commodities which either directly or indirectly provides for the satisfaction of human wants. Consumer goods (or final-demand goods) are those used for consumption purposes. They can be classified into non-durable goods (such as food) and durable goods (such as refrigerators). Producer goods are those used to produce other goods and services. These comprise intermediate goods (raw materials and semi-finished items) and fixed capital goods (buildings and equipment). Services are normally distinguished from goods by their intangible nature. They are normally consumed at the instant of their production, as in the case of a haircut. 'Bads' also exist; they have a negative value and an adverse effect on human satisfaction (for example, pollution). ...read more.


An example of a positive externality is when one firm sets up a training programme which increases the supply of qualified workers to another firm. There is an incentive for such a firm to internalize the positive externality by, for example, encouraging other firms to contribute to the cost of the training programme. In general, correction of externalities as a form of market failure may require taxes and subsidies to restrict negative and promote positive externalities respectively. Alternatively, legislation could be used against negative externalities like pollution. Healthcare being a merit good is very important to people. This is because individuals cannot give themselves adequate cover for healthcare. The cost for healthcare is so great that people can only afford it if they save for the future. ...read more.


This could sometimes lead to life threatening diseases. Free healthcare encourages people to visit doctors about illnesses they are experiencing. However sometimes this can be a waste of time and money as the individual may not have any problems. Free healthcare has helped save lives as people who cannot afford to pay for serious operations can receive the treatment they require. Since the NHS provides free healthcare, there is an excess in demand. For those who are unable to receive medical treatment their only option other than private provision is to go on a waiting list. This will of course put the lives of some patients at risk. AS Economics Chapter 11 - Discuss the relevance of these concepts to the subject of health care. 1 Athavan Arunachalam 12CFD ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Healthcare section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work