Externalities and Public Goods:
Market Failure and Resource Allocation:
1) Market Performance:
3 big objectives in economy:
Market Economy with many socioeconomic problems. Why?
Sometimes self-correcting (laissez-faire) mechanism doesn’t work well historically (The Great Depression in 1930s). Market economy does not necessarily guarantee the equivalent distribution of income and wealth. Invisible hands work in allotment through price mechanism. Through the severe competition, few people are able to survive this game to finally command the exclusive ownership of the resources and income.
Several reasons for the failure
Decentralized resource allocation is efficient through perfect competition. Imperfect competition through technical reasons – increasing returns to scale and natural monopoly.
Non Rivalry: When consumption of a food by one person does not reduce the quantity that can be consumed by others.Non Excludability: A good once produced is accessible to all consumers
The consequence that an action of any decision maker has on the well-being (utility) of other consumers or producers, beyond the effects transmitted by changes in prices.
Positive Externalities: Education, Bandwagon effect, health care, R&D, public transit and so on.
Negative Externalities: noise, pollution, toxic emissions, congestion, etc.
Uncertainty cannot guarantee the Pareto optimality in general equilibrium analysis. Kenneth Arrow offered that the efficient allocation can be achieved even under uncertainty if and only if there is a condition of perfect contingency market which means that there is a perfect insurance for any possible situations. But, we know this is almost impossible.
Role of the Government:
Market failure is not a sufficient condition but can be a necessary condition. Government failure? Surplus burden or Deadweight loss.
Latest technology based Microeconomics Online Tutoring Assistance
Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Microeconomics help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Microeconomics, project ideas and tutorials. We provide email based Microeconomics help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Microeconomics Homework help and assignment help services. They use their experience, as they have solved thousands of the Microeconomics assignments, which may help you to solve your complex issues of Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!