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3 Cards in this Set
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Market failures |
Market failures can be defined as failures in the market mechanism in allocating resources for social interest. *Consist of 3 main aspects. 1.Inefficient allocation of resources 2.Unfair distribution of resources 3.Macro economic instabilities |
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Inefficient Allocation of Resources & Unfair distribution of resources. |
*IAR Arisen due to weakness of price machanism. (eg : Arising externalities, Factor immobility, Missing markets, Production of demerit goods, Over utilization of common property resources ) *UDR Inequality in distributing income and wealth among households.Or disparity in income distribution. |
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Macro economic instabilities |
*Instabilities arisen in macro economic variables due to fluctuations of aggregrate demand are known as Macroeconomic Instabilities. *It's an intrinsic element of a market economy. |
Examples *Fluctuations of GPL *Fluctuations of interest rate *Fluctuations of foreign exchange rate *Instabilities of BOP |
