Scribd
Upload
17 views2 pages

Diskusi 7. B. Inggris Niaga

Uploaded by

tasnimamala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
17 views2 pages

Diskusi 7. B. Inggris Niaga

Uploaded by

tasnimamala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

After exploring the concept of market failure in our recent session, reflect on a real-

world scenario where a specific market is experiencing inefficiencies. Identify a


market that you believe is currently experiencing market failure and describe the
nature of this failure.

Market failure refers to a situation defined by an inefficient distribution of goods and


services in the free market. In an ideally functioning market, the forces of supply
and demand balance each other out, with a change on one side of the equation
leading to a change in price that maintains the market's equilibrium. In a market
failure, however, this balance is disrupted.
When markets fail, the individual incentives for rational behavior do not lead to
rational outcomes for the group. In other words, each individual makes the correct
decision for themselves, but those prove to be the wrong decisions for the group as
a whole.

A real-world example of market failure is the housing market in many urban areas,
particularly in cities like New York, London, or Jakarta. The inefficiency here can be
seen through the lens of housing affordability, where the demand for housing far
exceeds the supply, leading to soaring prices and a lack of affordable housing
options for low- and middle-income households.
There are many types of imbalances that can affect the equilibrium of the markets.
The following list provides an overview of some common causes of market failure.
 Externalities: Externalities occur when the consumption of a good or service
benefits or harms a third party. Pollution resulting from the production of
certain goods is an example of a negative externality that can hurt
individuals and communities. The collateral damage caused by negative
externalities may lead to market failure.4
 Information failure: When there is insufficient information available to
certain participants in the market, this can also be the source of market
failure. If the buyer or seller in a transaction lacks access to the information
on which the price is based, they may be willing to overpay or undercharge
for a good or service, disrupting the market's equilibrium.5
 Market control: When one party has too much control over a market, this
can also create imbalanced pricing and lead to market failure.6 In the case of
a monopoly or oligopoly, a single seller or a small group of sellers can
manipulate pricing. In other situations, known as monopsony or oligopsony, it
is the buyers that have the advantage. In either case, the disrupted balance
of supply and demand could cause market failure.
 Public goods: Public goods are another example of market failure because
they defy the tenets of supply and demand that drive the free markets. Public
goods and services are nonexcludable—once something like a street light is
produced, it is accessible to everyone, and the producer cannot limit
consumption only to paying customers. Public goods are also nonrival, as use
by one individual does not limit consumption by others. Given these
characteristics, the private sector has little incentive to produce public goods,
which leads to market failure, and the government usually has to provide
these goods or subsidize their production.
In such markets, the imbalance between supply and demand,
coupled with the inability of the market to internalize externalities
and provide equal access to all, results in market failure. The
government's role in addressing such failures typically involves
regulation, subsidies, or the provision of public housing to ensure a
more equitable and efficient housing market.

Reference :
https://www.investopedia.com/terms/m/marketfailure.asp

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy