Market Failure

What Market Failure covers

Market Failure is AS content, examined in both AS Unit 1 and AS Unit 2, which each cover the full AS content. 159 recall questions across 11 subtopics.

The 11 subtopics

Each one has its own page.

• Understanding market failure: Market failureRecall questions on Market failure.Open →
• Understanding market failure: Public goods, Merit and demerit goodsRecall questions on Public goods, Merit and demerit goods.Open →
• Understanding market failure: ExternalitiesRecall questions on Externalities.Open →
• Understanding market failure: Externalities of consumption and monopoly powerWhy external benefits and costs of consumption leave the market at the wrong quantity, and how monopoly power restricts output, raises price and cuts consumer surplus.Open →
• Understanding market failure: Information asymmetries and gaps, Income inequalityRecall questions on Information asymmetries and gaps, An absence of private property rights, Income inequality.Open →
• Understanding market failure: Volatile prices and externality diagramsWhy volatile prices are a market failure for producers, consumers and investors, and how to read the MSC, MPC, MSB and MPB curves on externality diagrams.Open →
• Why and how governments intervene in markets: Reasons for government intervention in marketsRecall questions on Reasons for government intervention in markets, State provision and regulation, Minimum and maximum prices.Open →
• Why and how governments intervene in markets: Maximum prices, road pricing, pollution permits and other interventionsBinding maximum prices and the excess demand they cause, road pricing, tradeable pollution permits, price stabilisation and guaranteed minimum prices, and the tax, benefit and minimum wage tools used against inequality.Open →
• Why and how governments intervene in markets: Evaluating government interventionRecall questions on Evaluating government intervention.Open →
• The effects of government intervention: Government intervention can create distortions in marketsRecall questions on Government intervention can create distortions in markets.Open →
• The effects of government intervention: Reasons for government failureRecall questions on The reasons for government failure.Open →

What you need to know

Answer each one before you reveal it.

Take Market Failure further

The same content, four other ways.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is market failure?

   Model answer

   Market failure occurs when the free market mechanism fails to allocate resources efficiently, resulting in a loss of economic welfare.

2. 2

   In the context of market failure, what does efficiency refer to?

   Model answer

   Efficiency refers to the maximisation of the sum of consumer surplus and producer surplus.

3. 3

   At the free market equilibrium output, what happens to total welfare when there is no market failure?

   Model answer

   Total welfare (consumer surplus plus producer surplus) is maximised.

4. 4

   Define consumer surplus.

   Model answer

   Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.

5. 5

   Why do merit goods represent a type of market failure?

   Model answer

   Merit goods are under-consumed in a free market because consumers undervalue their benefits due to imperfect information, leading to a socially sub-optimal quantity being consumed.

6. 6

   In what way are demerit goods considered a market failure?

   Model answer

   Demerit goods are over-consumed because consumers underestimate the harm to themselves and society, and the market price does not reflect the full social costs.

What is inside Levo

Six ways to work the same material.

Market Failure revision questions

What does Market Failure cover in WJEC A-Level Economics?

11 subtopics: understanding market failure: market failure, understanding market failure: public goods, merit and demerit goods, understanding market failure: externalities, understanding market failure: externalities of consumption and monopoly power, understanding market failure: information asymmetries and gaps, income inequality, understanding market failure: volatile prices and externality diagrams, why and how governments intervene in markets: reasons for government intervention in markets, why and how governments intervene in markets: maximum prices, road pricing, pollution permits and other interventions, why and how governments intervene in markets: evaluating government intervention, the effects of government intervention: government intervention can create distortions in markets and the effects of government intervention: reasons for government failure. Each one has its own page with questions and model answers.

How is Market Failure organised?

By the WJEC 1520QS specification, subtopic by subtopic, so it matches the order you are taught it in.