GCSE Economics Market Failure Revision Notes

• 1Market failure can result from externalities, public goods, and information asymmetries.
• 2Negative externalities occur when the production or consumption of a good causes harm to third parties.
• 3Positive externalities occur when the benefits of a good spill over to third parties.
• 4Public goods are non-excludable and non-rivalrous, leading to underproduction in a free market.
• 5Information asymmetry occurs when one party in a transaction has more or better information than the other.

Market failure happens when the market doesn't work as it should, leading to problems like pollution or not enough public services. It can occur because some costs or benefits aren't reflected in prices, or because some goods are hard to sell fairly. This means that sometimes, the government may need to step in to help fix these issues.