What are market failures? Discuss examples of market failures. ...

[clmills979]

What are market failures? Discuss examples of market failures. What can government do to improve the results of market failures?

Question 2

Discuss the impact of demand and supply changes on market equilibrium price and quantity. Express this graphically.

[chreslie]

Answer to Question 1

Market failures are undesirable social results associated with free market outcomes. They include the growth of monopoly power, the presence of externalities, a lack of public goods and services, and an inequitable distribution of income. Government can intervene by enforcing anti-trust, tax or subsidize externalities, provide for public goods and redistribute income to correct for market failures.

Answer to Question 2

An increase in demand will increase equilibrium price and quantity; and vice versa. An increase in supply will decrease equilibrium price and increase the equilibrium quantity; and vice versa. A simultaneous increase in demand and supply will assuredly increase the equilibrium quantity but the impact on equilibrium price is uncertain. A simultaneous increase in demand and decrease in supply will assuredly increase the equilibrium price but the impact on equilibrium quantity is uncertain.

[clmills979]

Thanks for the timely response, appreciate it

[Missbam101]

TYSM