Market failure

High school (ages 12+)
People & Society

Name:

Date:

Step 1 · Read the article

Open the article and read it at the level above. Then answer the questions below in your own words.

https://smallwhale.org/articles/market-failure

Write what each word means, using the article.

Do not copy the article. Write two things you learned, the way you would explain them to a friend.

Answers below are taken from the article’s stored facts, so they match what the student read.

1. What is the theoretical framework?Deviations from the conditions of perfect competition leading to allocative inefficiency
2. What is the primary categories?Externalities, public goods, information asymmetry, market power, merit/demerit goods
3. Why does pollution cause market failure?Pollution from factories adds costs to society that the factory doesn’t pay for, so the market ignores those costs.
4. How do public goods lead to problems for businesses?Public goods like street lights are free for everyone, so people don’t pay and businesses don’t provide enough of them.

Allocative Efficiency: A state where resources are distributed to produce the combination of goods and services that society most desires.
Pigouvian Tax: A tax levied on any market activity that generates negative externalities, equal to the external cost.
Free-Rider Problem: Occurs when individuals consume more than their fair share of a public good or service, or pay less than their fair share of the cost.