The self-explanatory word market failure brings some to the question of what market failure is!
In the free market economy as well as in capitalism one is of the firm conviction that the free market regulates everything, but it comes again and again to market failure, because the free market cannot regulate everything itself, capitalism as well as the free market economy rarely have with social responsibility or morally correct behavior on the hat, there are no legal regulations for this, but only recommendations, at least not nationwide!
If the free market cannot meet the needs of the citizens, taxpayers, ... with its offers, it is called market failure . The last example is the lack of disinfectants, as well as the insufficiently available protective masks and toilet paper.
But market failure occurs more and more often when the states, federal government, ... gradually privatize everything and are of the opinion that the capital free market covers everything and regulates itself according to the rules of supply and demand.
Another example of market failure in Germany!
Comprehensive internet connection, digitization, socially justifiable salaries, affordable living space in large urban areas, electric cars, clean air, healthy food, ... etc.
What is market failure and how does it happen, so understand market failure?
Market failure is the economic situation defined by the inefficient distribution of goods and services in the free market. In the event of market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group. In other words, each individual makes the right choices for themselves, but these turn out to be the wrong choices for the group. In traditional economics, this can sometimes be portrayed as a stationary imbalance where the amount delivered does not match the amount requested.
Market failure occurs whenever the individuals in a group are worse off than if they had not acted in a perfectly rational self-interest. Such a group either incurs too many costs or receives too few benefits. Economic outcomes in the event of market failure differ from what economists normally consider optimal and are usually not economically efficient. While the concept appears simple, it can be misleading and easily misidentified.
FAQ 182: Updated on: 1 October 2020 06:55