Question

Based on failures in the economy, how do we know if it is a market failure or a government failure? How does a market failure or government failure impact someone like me, a college student?

Answer 1

Market faliure means when there is poor allocation of resource .it means there is no efficiency in the market.when market is unable to reach at its desirable position.as we know market is decided through large number of buyer and seller but when there is monoply in the market or their is not free market entry system then it is called market failure.Market is also affected by the content of information received .If information is not clear then market is not set up by incomplete information.External environment is affected then it is called market failure.like not maintaining goods at desirable level with great quality standard.If there is no market or if there are lack of property rights then it is known as market failure.

Government failure means when a government is unable to take steps towards solving market failure.like if government knowns that there is no enough demand supply then government can gives subsidies snd cut the tariff to promoting their goods.but if government fails to do this then it is government failure to protect the market.government failure is like when government take decision for own benefits and not for the help of poor.when government is unable to collect information through market.when there is poor management or management is not efficient then it is government failure.

Government failure and market failure impacted badly on all person.because when market failure is arises then there is irregular supply of demand.there will be no control on price.No job opportunity is arises and when government fails to interference with this issue then government failure is arises.There will be higher taxes due to government failure.High adminstration cost is arises.Government fails to make long term plan.No new job opportunity will be arises.