1. Claudia Gonzalez David Tran What is Market Failures?

2. Terms to know:  Externality  Externality: unintended side effects that either benefits or harms a third party.  Positive Externality:  Positive Externality: a benefit received by someone who had nothing to do with the activity that generated benefit.  Negative Externality:  Negative Externality: a harm, cost, or inconvenience suffer by a third party that is not involved in the activity that caused it.  Public Goods:  Public Goods: are product are collectively consumed by everyone, and whose use by one individual doesn’t get lower.

3. Introduction  The cover story, however, reminds us of another, more serious, fact of economic life-that market sometimes fail. How they fail, and how the failures remedied, is a concern for the economist. We are now about to know how markets fail.

4. What is Inadequate Competition? Over time, mergers and acquisitions have larger and fewer firms dominating many industries. The decreases in competition consequences are: Inefficient Resource Allocation Higher Prices and Reduced Output Economic and Political Power Both Sides of the Market

5. The 5 Most Common Market Failures  Accordingly, Market Failures can occur when any of these 5 condition significantly altered. The 5 common Market failures are:  Inadequate competition  Inadequate Information  Resource immobility  External economy  Public goods

6. The following consequences… Inefficient Resource Allocation: tends efficient use of scarce resources-resources that could be put other, more productive uses if they were available. Higher Prices and Reduced Output: an imperfect competitor such as a monopoly uses it position to prevent competition.

7. Consequences continues. Economic and Political Power: Inadequate may enable a business to influence politics by wielding its economic might. Both Sides of the Market: No competition exist if a monopolist dominates the supply of the market.

8. What is Inadequate Information? In order for resources to be allocated efficiently, consumers, businesspeople, and government officials-must have adequate information about market condition

9. Example of Inadequate Information A secretary or an accountant may receive a competitive wage in the automobile industry, but are wages for the same skills higher in the insurance industry, or in the banking economy. So basically some information are easier to find, such as ads and sales prices on newspapers.

10. What is Resource Immobility? One of the most difficult problem of the economy. This means that land, capital, labor, and entrepreneurs do not move to market to returns are the highest.

11. What is Externalities? Many activities such as externalities generate some kind side effect that either benefits or harms a third party not involved in the activity that caused it. Negative Externalities Positive

12. Negative Externalities A negative externality occurs when an individual or firm making a decision does not have to pay the full cost of the decision. So if a good has a negative externality, then the cost to society is greater than the cost consumer is paying for it.

13. Positive Externalities A positive externality exists when an individual or firm making a decision does not receive the full benefit of the decision. The benefit to the individual or firm is less than the benefit to society.

14. What is Public Goods? Public goods are product are collectively consumed by everyone, and whose use by one individual doesn’t get lower. Examples of publics goods:  Un-crowded highways  floods controls measures  National Defenses  Police Fire/Protection

15. Market Failure’s Graph

16. References  http://economics.fundamentalfinance.com / http://economics.fundamentalfinance.com /  http://www.ask.com/ http://www.ask.com/  http://www.glencoe.com/sec/socialstudie s/economics/index.html http://www.glencoe.com/sec/socialstudie s/economics/index.html  http://www.wikipedia.org/ http://www.wikipedia.org/  http://dulwicheconomics2011.blogspot.co m/2009/11/r10.html http://dulwicheconomics2011.blogspot.co m/2009/11/r10.html