Market failure

In economics, a market failure exists when the production or use of goods and services by the market is not efficient.

Productive Efficiency- where production takes place using the least amount of scarce resources.

Economic Efficiency- where both allocative and productive efficiency are achieved.

Inefficiency- any situation where economic efficiency is not achieved.

Free market mechanism -the system by which the market forces of demand and supply determine prices and the dicisions made by consumers and firms.

Information Failure- a lack of information resulting in consumers and producers making decisions that do not maximise welfare.