market failure

• what is market failure?

  when theres a misallocation of resources
• what are the 3 main causes of market failure?

  • information gaps
  • provision of public goods
  • externalities
• what are externalities?

  negative or positive third party spillover effect that arises from either consumption or production
• what can cause negative consumption externality?

  overconsumption of a demerit good
• policies to reduce negative consumption externality?

  • banning it completely
  • taxation to reduce incentive to buy
  • provide more information and knowledge as to why it is harmful