SECTION 1 MANAGING THE ECONOMY Market Failure The economy at work GCSE ECONOMICS: UNIT 12.
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Transcript of SECTION 1 MANAGING THE ECONOMY Market Failure The economy at work GCSE ECONOMICS: UNIT 12.
SECTION 1MANAGING THE
ECONOMY
Market Failure
The economy at work
GCSE ECONOMICS: UNIT 12
SECTION 1MANAGING THE
ECONOMYLesson Objectives
• Understand what is meant by market failure
• Produce a short 5 minute lesson on one of the types of market failure
SECTION 1MANAGING THE
ECONOMYMarket Failure
• In today’s lesson we will be looking at Market Failure
• Before understanding how a market fails it’s important you know what a market is!
• Write down your own definition of a market
SECTION 1MANAGING THE
ECONOMYWhat is a market?
• A market is a place where buyers and sellers come together to conduct a transaction together
• Markets left to operate freely have a good chance of operating efficiently
• By operating efficiently, business costs can be kept low in order to improve profits
• In this way, the market ensures that the resources are allocated efficiently
SECTION 1MANAGING THE
ECONOMYWhat is market failure?
• Market failure occurs when markets fail to allocate resources efficiently
• This means the prices of goods and the quantities produced are not at the level that ensures that economic welfare is kept as high as possible
• For example, if a market fails, some goods may be under-produced or not even produced at all
SECTION 1MANAGING THE
ECONOMYTypes of market failure
• There are a number of different types of market failure, such as:– Merit goods/De-merit goods– Public goods– Imperfect competition e.g. monopoly– Positive externalities/ Negative externalities– Unequal distribution or income/wealth– Immobility of factors of production (e.g. immobility
of labour)
SECTION 1MANAGING THE
ECONOMYTypes of market failure: Over to you
• You have 15 minutes to research your chosen type of market failure
• Produce a handout which includes the following;– a clear definition of your type of market failure– an explanation as to why it occurs– examples of your type of market failure in the real
world• You will present your findings to the other groups
SECTION 1MANAGING THE
ECONOMY
Match the keyword to the expression which fits best
Market Failure
Non-rival
Non-excludable
Free-rider
Too much or too little, but never just enough
There is enough for everyone
You can’t stop me
You buy it….no you buy it!
SECTION 1MANAGING THE
ECONOMYWhat do you see?
Under-consumed!
SECTION 1MANAGING THE
ECONOMYWhat do you see?
Over-consumed!
SECTION 1MANAGING THE
ECONOMYWhat do you see?
Healthcare would beunder-consumed if
the government didn’t step in!
SECTION 1MANAGING THE
ECONOMYWhat do you see?
Over-consumed!