Definition of Market failure:
Situation where resources cannot be efficiently allocated due to the breakdown of price mechanism caused by factors such as establishment of monopolies. See also market inefficiency.
Failure on the part of the market system to provide the optimum level of production or quality of product or service; an instance of this.
Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.
In other words, each individual makes the correct decision for him or herself, but those prove to be the wrong decisions for the group. In traditional microeconomics, this can sometimes be shown as a steady-state disequilibrium in which the quantity supplied does not equal the quantity demanded.
How to use Market failure in a sentence?
- The stock became a market failure and a lot of people were up in arms about it because of how much they put into it.
- Market failure can occur in explicit markets where goods and services are bought and sold outright, which we think of as typical markets.
- Market failure can also occur in implicit markets as favors and special treatment are exchanged, such as elections or the legislative process.
- There was a market failure which would suggest wrong doings having been occurring for quite some time as this is quite rare.
- Market failures can be solved using private market solutions, government-imposed solutions, or voluntary collective actions.
- A market failure can really slow down your business earnings and you will need to find new ways to adjust.
- Market failure occurs when individuals acting in rational self-interest produce a less than optimal or economically inefficient outcome.
Meaning of Market failure & Market failure Definition