Market Failure

At present time market failure is very important topic in the current business world. Because at present time many countries facing this problem. Generally market failure means when market are not able to go freely functioning about economic efficiency. Its means that when in a market the quantity of a product demand by the customers does not match to the supplied by the suppliers. In a simple word its means that when a market are not able to work optimally, that call market failure. We can set up a example for market failure. Like share stock market. At present time share price going to decrease day by day.

There are many reasons for market failure. Such as public goods, merit goods e.t.c.

Public goods: there are 2 kinds of goods one is non-rival and another is non-excludable. Public goods are non excludable good. Non-excludable goods mean that if the good is providing one time and no one can stop the benefiting from the product. Like Air defence systems, Roads / motorways, Public parks & beaches etc. This failure did as the goods being produced are of a nature that the market would under provide, over provide or even fail to provide, if the government did not intervene. So for stopping market failure government can play some rules and regulation of public goods. 

Merit goods: when for the insufficient information demerit goods are produce more then the demand, that time market will goes to fail. Because most peoples expecting good product.  So produce the merit good producer need to make sure how much he need to produce and is that acceptable to the consumer or not. a merit good is a product like education and when the imperfect information government think that consumers undervalue.

Externalities: Externalities means that 3rd parties economic activity. That means when a 3rd party is affected by the decisions and action of the others. One of the main reasons for market failure is no clearly defined of property right for those agents who are operating in the market. There are two kinds of externalities one is positive externalities another negative externalities. Negative externalities like Smoke. So solve this problem government need to make sure about the clear property right, like intellectual property, patent etc.

Imperfect competition: Another main reason for the market failure is imperfect competition. Competition is good for the market but not imperfect competition. The main reason is imperfect completion is differences in income and wealth between different groups within our economy. Which is lead to our living standards. And the values of judgements come into play when we distribute of wealth in the society. Government can play a vital rule for solve this problems. In my opinions government can take more tax from the reach peoples.

“Government Policy: Welfare Policy”

Whenever government make any rules and law there must be some conflict about that laws. So for achieving the main goal to the law there must need some resources there. So the government laws also an economic problem.

There are 2 kinds of government object:

Economic and

Non-economic.

A.

Welfare policy decisions are often made in the areas of education, health, and employment. My current Government policy on welfare is Education policy. Recently UK Government increase tuition fees for higher education.

B.

The government can make intervention by 2 ways one is taxation and other subsidies. when the market is going to fail that time the gorvernment is apply this rights. So I have chosen the policy on the based of following instruments ; 

1. Taxation and

2. Subsidies

Taxation : 

The purpose of taxation is to finance government expenditure. A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" in the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name. so its take very important role to the price of products.

So the Taxation can be seen as the opposite of a subsidy. In most cases taxes are levied because the market failure is that too many of the goods in question are being produced and this over- production is seen as imposing some from of cost to society.

Pollution , congestion, the use of de-merit goods are all examples. 

Subsidies: 

Subsidies is very opposite to tax and it is very eassy idea where the government give some impregnate to producer for more produce than the normal produce.A subsidy is an assistance paid to a business or economic sector. So it is a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service.

When Government help in a sector for public is called subsidy. For example, in Agriculture sector Government can supply instruments of half price, they can supply seeds and give them loan without interest from government bank. 

The industry where this is most obvious is agriculture, where the UK Common Agriculture Policy is held up as an excellent example of how subsidies can work but have numerous side effects. However , the principal also extends to other areas- housing , for example.

cause of the problem of rising house prices it is very difficult to get on the housing ladder, because there is not much low-cost housing available. Some councils have granted planning permission for new housing  for local people and not high price of that house. Others are looking for a public subsidy to ensure that low-cost housing is made available for those that need it.

From the example, we can conclude that the market failure is an insufficient amount produced to meet consumer needs. Finally subsidies bring positive externalities.

The concept of externalities - subsidies bring positive externalities, taxation reduces negative externalities. 

C.

Evaluation of the current Government policy in education :

The current Government Policy of education which is using within the UK is failure.

In intervening in the market, the government is seeking to correct the problem that has been identified generally using some from of subsidy, tax, regulation, direct provision or other method. The market failure may be partly corrected but may also have an impact on other related and non -related markets.

The problems surrounding so called government failure stem from a number of key areas ;

Lack of knowledge about what the public wants.

Lack of knowledge about the relative costs and benefits of a policy.

The distortion of markets, the price signal and incentives.

So called rent where the interests of powerful minority lobbyists get precedence over more pressing but less powerfully supported issues.