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Thread: Market Failure?

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    Rampage's Avatar
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    Market Failure?

    Hey guys. I neeed to write en econ paper on Market Failure. I can't think of any real life examples of market failure so I need your help This is what I need to do...

    Your paper will focus on a real life example (your choice) of market failure. You will select an example, describe what type (cause) of failure it is and propose a remedy. You will also explain why your remedy is an improvement over the current situation and what impediments would likely prevent your remedy from being adopted.

    I just can't think of any Market failures


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    Click avatar for tech links/info, donation request K447's Avatar
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    Quote Originally Posted by Rampage View Post
    ...I just can't think of any Market failures
    What is your definition of a Market failure?

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    Rampage's Avatar
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    Ummm, this is what he says

    There are situations, however, where these ideal conditions do not exist, or are severely restricted. When this happens markets may not allocate resources efficiently. Economists refer to these situations collectively as market failure.

    I think I found one though on global warming. I dont support it but if it gets me an A I can for the night

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    jtskir15f's Avatar
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    I agree. depends on the definition. with that said if this fits what your professor is looking for you could do something like positive or negative externalities. Ex: education and how it provides more benefits to society than the consumer takes into account so the free market tends to produce less education at a given price than the market demands. This could be remedied through incentives for price breaks on education or through incentives to the schools/universities to provide more education at a given level of demand.

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    Rampage's Avatar
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    Quote Originally Posted by jtskir15f View Post
    I agree. depends on the definition. with that said if this fits what your professor is looking for you could do something like positive or negative externalities. Ex: education and how it provides more benefits to society than the consumer takes into account so the free market tends to produce less education at a given price than the market demands. This could be remedied through incentives for price breaks on education or through incentives to the schools/universities to provide more education at a given level of demand.
    Exernalities is something I can write about. The global warming topic is a possibility because it says something about entailing costs not paid for by people who "create" global warming

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    Rampage's Avatar
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    Anyone heard of the exploding Ford Pinto? I think I might write it on this just because of how numerous it is. I guess Ford Pinto's would tend to explode if hit in the back bumper due to not enough protection between the back bumper and the gas tank. Ford chose to ignore the issue because they thought that it would be cheaper to pay lawsuits then fix the issue. This would be a market failure because they didn't take into affect the loss of lives right? And also it would have only cost Ford $11 per gas tank to fix.

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    This is how I run a jetski shop in the desert nmpeter's Avatar
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    recall formula

    (((((cost of recall/number of lawsuits((2)))d*average lawsuit settlement(q)/d(2))))))

    if d/q >zero then let the lawsuits roll on in.

    market failure is pretty simple actually..why not use the housing market fiasco as your model.

    lend money to people on a say so so they can buy a home, drives home prices way up as there is more demand then supply, deadbeats default on loans driving market down lower then expected as there is no a huge supply of very very cheap homes to buy, but nobody can get a loan. People that don't need a loan are waiting for all the homes to come on market, then they step in and buy up everything in site.

    by the way, the buy everything in site is coming in three years. Please mark your calendars. If you think housing issues were bad before..just wait. Now is a good time to be a renter.

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    YoYamma's Avatar
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    Quote Originally Posted by nmpeter View Post
    by the way, the buy everything in site is coming in three years. Please mark your calendars. If you think housing issues were bad before..just wait. Now is a good time to be a renter.
    Hmm, someone broke my crystal ball... why three years?

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    YoYamma's Avatar
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    Quote Originally Posted by Rampage View Post
    I just can't think of any Market failures
    "Market failures are often associated with non-competitive markets, externalities or public goods. The existence of a market failure is often used as an justification for government intervention in a particular market..."

    "Traffic congestion is an example of market failure, since driving can impose hidden costs on other drivers and society. Solutions for this include public transportation, congestion pricing, toll roads and toll bridges, and other ways of making the driver include the social cost in the decision to drive.

    Other common examples of market failure include environmental problems such as pollution or overexploitation of natural resources..."

    "Many social democrats and "New Deal liberals", have adopted this analysis for public policy, so they view market failures as a very common problem of any unregulated market system and therefore argue for state intervention in the economy in order to ensure both efficiency and social justice..."
    http://en.wikipedia.org/wiki/Market_failure

  10. #10
    Rampage's Avatar
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    im just gonna write my paper on the exploding ford pinto - he won't expect that

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