CHAPTER IX

MARKET FAILURES AND

GOVERNMENT INTERVENTION
MARKET FAILURES

• When goods and services by a market become inefficient or no longer

bring in economic efficiency.
• Give an important economic case since market may not always allocate
scarce resources in the most efficient manner to provide maximum social
welfare
MARKET FAILURES IN FOCUS:

LABOR MARKET FINANCIAL MARKETS ENVIROMENTAL MARKET FAILURE

PRODUCT MARKETS HOUSING MARKET COMMODITIES MARKETS

TYPES OF MARKET FAILURE
 REASON FOR THE GOVERNMENT MAY INTERVENE BY:
GOVERNMENT
INTERVENTION Imposing higher taxes to correct externalities (impose
tax to entities that highly encourage pollution)

*Government intervention may seek to correct the

distortions created by market failure and improve
Imposing penalities to violators
Market operations to attain efficiency.

*This objective is to promote general economic

Efficiency and fairness. Introducing policies to encourage competition into
markets

Imposing price controls