Market Failure essay final 
Market failure and how government can attempt to correct it
Market failure is a situation in which the free market fails to allocate resources effectively, causing a situation where the quantity demanded by the consumer is unequal to the quantity supplied by the supplier.
Ledyard (1987) argues in the textbook Environmental Economics in Theory and Practice that “the best way to understand market failure is to first understand market success” (Hanley, et al., 2007, p. 44) My definition of market success would be an open market whereby the quantity supplied meets the quantity demanded, with no overconsumption of goods that have a long‑term cost to society and provision in place for basic essentials to be supplied to society in the correct proportion.
There are many reasons why market failure can occur, and it is not a rare occurrence. This appears to be backed up in statements by Nelson (1987) and Dahlman (1979), quoted in the textbook Economic Efficiency in Law and Economics: “A fundamental problem with the concept of market failure, as economists occasionally recognise, is that it describes a situation that exists everywhere” (Zerbe, 2002, p. 168).
I will look at some of the reasons why market failure occurs, with examples, and look at forms of government intervention to try and correct it. I will then look at some instances of reported market failure within the London property market and how government has intervened, as well as assessing the success of the intervention.
Public goods
Public goods, as outlined by McConnell and Brue (1999, pp. 87,88), are indivisible to individual buyers and it would be impossible to exclude individuals from benefiting once these goods/services come into existence. An example of such public goods would be a lighthouse on a treacherous coast. It would be economically justified, as the benefit of fewer shipwrecks would far exceed its cost. The benefits to each individual, however, would not be great enough to justify them
Market failure is a situation in which the free market fails to allocate resources effectively, causing a situation where the quantity demanded by the consumer is unequal to the quantity supplied by the supplier.
Ledyard (1987) argues in the textbook Environmental Economics in Theory and Practice that “the best way to understand market failure is to first understand market success” (Hanley, et al., 2007, p. 44) My definition of market success would be an open market whereby the quantity supplied meets the quantity demanded, with no overconsumption of goods that have a long‑term cost to society and provision in place for basic essentials to be supplied to society in the correct proportion.
There are many reasons why market failure can occur, and it is not a rare occurrence. This appears to be backed up in statements by Nelson (1987) and Dahlman (1979), quoted in the textbook Economic Efficiency in Law and Economics: “A fundamental problem with the concept of market failure, as economists occasionally recognise, is that it describes a situation that exists everywhere” (Zerbe, 2002, p. 168).
I will look at some of the reasons why market failure occurs, with examples, and look at forms of government intervention to try and correct it. I will then look at some instances of reported market failure within the London property market and how government has intervened, as well as assessing the success of the intervention.
Public goods
Public goods, as outlined by McConnell and Brue (1999, pp. 87,88), are indivisible to individual buyers and it would be impossible to exclude individuals from benefiting once these goods/services come into existence. An example of such public goods would be a lighthouse on a treacherous coast. It would be economically justified, as the benefit of fewer shipwrecks would far exceed its cost. The benefits to each individual, however, would not be great enough to justify them
Bibliography: Campbell, D. & Craig, T., 2005. Organisations and the business environment. s.l.:Elsevier. GLA Economics, 2003. Market Failure and the London housing Market, London: Greater London Authority. Hanley, Shogren & White, 2007. Environmental Economics in theory and practice. In: s.l.:Palgrave Macmillan, p. 44. McConnell & Brue, 1999. In: Economics. s.l.:Irwin McGraw-Hill, pp. 87,88. Milgrom, P. & Roberts, J., 1992. Economics, organization and management. s.l.:Prentice Hall. Riley, G., 2012. Competition & Monopoly in markets. [Online] Available at: http://www.tutor2u.net/economics Wetherly, P. & Otter, D., 2011. In: The Business Environment- Themes and Issues. s.l.:Oxford, p. 42. Wildasin & Boadway, 1984. In: Public Sector Economics. s.l.:s.n., p. 61. Zerbe, R., 2002. In: Economic efficiency in law and economics. s.l.:s.n., p. 168.