Sources of market failure

Sources of market failure. Market failure has a very precise meaning in economics. It doesn’t simply mean dissatisfaction with market outcomes, it refers to a situation when a market left to itself does not allocate resources efficiently. Where market failures exist, there is a potential role for government to improve outcomes for the community, the environment businesses, and the economy.

Structural market failure. Market failure occurs whenever markets fail to deliver an efficient allocation of resources and the result is a loss of economic and social welfare. Market failure exists when the competitive outcome of markets is not satisfactory from the point of view of society. What is satisfactory? Nearly always involves value judgments. Complete and partial market failure.