A-Level Economics Market Failure Revision Notes

• 1Types of market failure include public goods, externalities, information asymmetry, and market power.
• 2Public goods are non-excludable and non-rivalrous, leading to under-provision in a free market.
• 3Externalities are costs or benefits that affect third parties not involved in a transaction.
• 4Information asymmetry occurs when one party in a transaction has more or better information than the other.
• 5Market power can lead to monopolies or oligopolies, resulting in higher prices and reduced output.

Market failure happens when the market doesn't work as it should, meaning resources aren’t used efficiently. This can happen for several reasons, like when public goods aren't provided enough, or when one party knows more than the other in a transaction. As a result, people might not get the best deal, and society as a whole can lose out.