Part of The Student Room Group

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

IB Economics notes on market failure

Extracts from this document...

Introduction

When a market fails, governments are often expected to intervain to move towards an optimal allocation of resources. Types of market failure Lack of public goods: Public goods are goods that would not be provided in a free market. Some goods called quasi pg, could be supplied by the free market. Public goods have two characaristics 1. They are non-excludeble 2. Thay are non-rivalrous A good is said to be non-excludeble when its impossible to stop other people consuming it once its provided. A good is said to be non-rivalrous when one person consuming it does not prevent another person som consuming it as well. Government may try to reduce this market failure by intervening in a number of ways. ...read more.

Middle

Education will be provided with alot of help from taxpayers. But sport faculties may only get some subsidized. Over-supply of demerit goods Demerit goods are goods that will be over provided by the market and because of this they will be over consumed. Goverment would like them to be consumed in a lesser degree or not at all. Examples, cigaretts, childponografy. They can ban, make it illigal (black markets may appar), attracted by the chance to make profits by fulfilling an on going demand. Some can be taxed, i.e cigaretts. The existence of externalities An externality occurs when the production or consumption of a good or service has an effect on a third party. If this effect is harmful we talk about negative externalities. ...read more.

Conclusion

MPC<MSC. The government can: Tax the firm, they could ban, could issue tradeble emission permits. Tradeble emission permits: The government dicides upon a level of pollution each year. Give TEP to individual firms (a max pollution) and then they can buy from each other. Positive externalities of production: benefit the third party. E.I a training at a job. Nagative externalities of consumtion Consumed by individual negativly affects the third party. E.i. Cigaretts. Government can ban smoking. Government can impose indirect tax smokes. Government can advertice and educate in the dangers in smoking. Positive externalities of consumption provide external benefits to the third party. E.I. Health care. MSB>MPB. Government wiching to increase the consumtion can: Subsidize the supply of health care. Positive adverticing. Have laws that say you have to have health care. COMMON POOL REASOURCES. Reasources that are difficult and expencive to exclude people from. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

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

or


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

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Market Failure IA Commentary. This article is about the price of cigarettes in Macao ...

    To improve the situation, the government is imposing a raise in the tax of tobacco from "MOP 4 to MOP 6". The cause of a tax being imposed on the firm producing the good (tobacco) that has the negative consumption externality will result in a decrease in supply and an

  2. The structure of the EU budget and its allocation

    revised forecast submitted by Member States in September 2010 showed that the declarations of expenditure from Member States would be below the available appropriations. Consequently, an amount of EUR 1 160 million was redeployed for other programmes through the Global Transfer.

  1. Growth and Development Problem Set - IB Economics exam questions and answers.

    Developing countries often have inadequate taxation institutions and tax structures, resulting in collection of low levels of revenues, often with negative impacts on equity and resource allocation. Inequities in the tax system accentuate income inequalities: to the extent that tax systems are not progressive, there is limited, if any, redistribution

  2. Macro Economics Notes

    and rent (land). You then take off Stock appreciation (the rise in stock values due to inflation rather than increases in value added) to get Gross Domestic Income. Output Method You add up all the output produced by each of the industrial sectors - Agriculture, energy, manufacturing, distribution, banking, education and Health and other public services.

  1. Old IB Questions

    and non-collusive (oligopolistic firms do not agree, whether formally or informally, to fix prices or collaborate in some way) oligopoly. Non-price competition is very important in oligopoly for the following reasons: * Oligopolistic firms very often have considerable financial resources (due to large profits)

  2. Essay on negative externalities

    types of negative externalities are negative externalities of consumption Negative externalities of consumption: When a product consumed by an individual adversely affects a third party , it is known to have negative externalities of consumption Examples include smoke from cigarettes, fumes from cars, alcohol , drugs etc These negative externalities make social benefits less than marginal private benefits.

  1. The Benefits of Microcredit to Bangladesh

    on extreme poverty than on moderate poverty.? The results of this study indicate that micro credit not only affects the welfare of participants and non-participants, but also the aggregate welfare at the village level. In fact even in disaster situations and post conflict areas, it has helped rebuild economic activities and livelihoods.

  2. Explain the Main Sources of Market Failure that Can Occur in the Market System ...

    It is deposited in the Britain and Western Europe and may cause increasing lung disease (Geoff 2006).

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work