What is Market Failure?
- AS, A Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 21 May 2017
Market failure occurs when freely functioning markets fail to allocate scarce resources in a way that optimises social welfare. This short introductory topic video explores some of the main examples of market failure including from the housing and labour markets.
Complete Market Failure - when the market does not supply products at all – there is a missing market
Partial Market Failure - when the market functions but it supplies either the wrong quantity of a product or at the wrong price.
Most market failures covered in A level Economics are partial - involving a deadweight loss of social welfare