Introducing 

Prezi AI.

Your new presentation assistant.

Refine, enhance, and tailor your content, source relevant images, and edit visuals quicker than ever before.

Loading content…
Transcript

Market Failure

Unit: 11

Activity 3

Between 1977 and 2006, alcohol-related medical emergencies and hospital treatments doubled in UK.

a) Explain why alcohol is a demerit good

b) Explain two ways which the UK goverment

could use to reducethe consumption of alcohol.

Activity 2

Some African countries provide free primary education. In a number of other African countries, state school charge fees

a) Identify two arguments for providing free primary education.

b) Explain why, if left to market forcers, education is likely to be under-consumed.

Extra: If education is a merit good, explain why the government decided to charge tuition fees for the majority of those attending university.

Information Failure

Lack of information = decision making not in the best interests. (moral hasard)

e.g. - fix car

Multiple Choice

Abuse of Market Power Monopoly

A lack of competition between firms means that the business is not forced to keep adapting to consumers’ demands e.g. Microsoft is an almost perfect monopoly supplier of computer operating systems.

1. In which case is market failure occurring ?

a) Consumers determining what is produced

b) Firms producing above the lowest possible cost

c) Price failing as a result of a decrease in demand

d) Price rising as a result of an increase in cost of production

Thank you !

:)

Externalities

They exist when the cost of producing goods, and the benefits gained from consuming goods, don't match the true costs and benefits to society.

Negative

Positive

Occur when the cost to society exceeds the private cost to the business. The external cost is paid by the rest of society. Its not an actual payment of money.

e.g. Pollution

Occur when the benefits to society from the consumption of a product exceed the private benefits to the individual consumer. e.g. Education

Task

Identify two products;

one that causes negative externalities and one that causes positive.

Analyse their impact on society and business.

Public Goods

Merit Goods Demerit Goods

Non-excludable

Non-rival

Free Riders

Government failure

Under consumed - people do not realize their true value (training courses, personal development, healthcare).

Over consumed - harmful to consumers (fast-food, sugar, alcohol)

Influence of political factors

Learn more about creating dynamic, engaging presentations with Prezi