Market failure refers to the economic situation faced by many
free economies in which there is an ineffective distribution of
goods and services.
Market failure occurs when an economy's efficiency criteria is
not met hence leading to social welfare loss.
The main reason behind this failure is due to the fact that the
people influencing the market activities are self centered and do
not act in accordance with the social point of view.
This will lead to the results that are not efficient and can
only be improved if actions are taken by keeping the societal point
of view in mind.
When the value of produced goods is not equal to the value of
the forgone production a market fails as the market efficiency
condition is not met.