Question

Market failure is the result of an inefficient market condition’. Discuss this statement focusing on the reasons for such an inefficient market condition.

Answer 1

Market failure refers the economic situation defined as an inefficient distribution(not e fficient distribution) of goods and services in the free market. In market failure occurs when the individual incentives for rational behavior do not lead to rational outcomes for thegwhole group.Market failure occurs when individuals acting in rational self-interest produce a less than optimal or economically,  sometimesbthis can be shown as a steady state disequilibrium in which the Quantity Demand is not equal to Quantity supplied

Market inefficiencies exist due to asymmetric information, transaction costs, market psychology, and human emotion and some other reasons.