What is Market Failure?

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