Market Failure

• Externalities are third party effects arising from production and consumption of goods and services for which no appropriate compensation is paid
• Information gap exists when either the buyer or seller does not have access to the information needed for them to make a fully informed decision
• Market fallure exists when the competitive outcome of makets is not efficient from the point of view of the economy as a whole. This is usually because the benefits that the market confers on individuals or firms carrying out a particular acitivity diverge from the benefits to society as a whole
• Public goods are non rivalrous, non excludable