Transcript Slide 1

SECTION 1
MANAGING THE
ECONOMY
GCSE ECONOMICS: UNIT 12
The economy at work
Market Failure
SECTION 1
MANAGING THE
ECONOMY
Lesson Objectives
• Understand what is meant by market failure
• Produce a short 5 minute lesson on one of
the types of market failure
SECTION 1
MANAGING THE
ECONOMY
Market 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 1
MANAGING THE
ECONOMY
What 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 1
MANAGING THE
ECONOMY
What 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 1
MANAGING THE
ECONOMY
Types 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 1
MANAGING THE
ECONOMY
Types 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 1
MANAGING THE
ECONOMY
Match the keyword to the
expression which fits best
Market Failure
There is enough for
everyone
Non-rival
You buy it….no you buy
it!
Non-excludable
Too much or too little,
but never just enough
Free-rider
You can’t stop me
SECTION 1
MANAGING THE
ECONOMY
What do you see?
SECTION 1
MANAGING THE
ECONOMY
What do you see?
SECTION 1
MANAGING THE
ECONOMY
What do you see?
SECTION 1
MANAGING THE
ECONOMY
What do you see?