Market Failure and Government Intervention

What the page covers

The resources here follow the path from why markets fail to what governments do about it. The mind maps on Market Failure cover externalities, merit goods and demerit goods, including how consumption can be encouraged or discouraged. Others, such as Externalities and the map on positive and negative externalities in consumption and production, set out marginal private cost and the idea of spill-over effects on third parties.

Where to start

Begin with the mind maps, because they give you the vocabulary. Open Market Failure, then Merit and Demerit Goods, then Externalities. If you are on an Edexcel course, the flashcard deck Theme 1 Microeconomics A level Edexcel (Introduction to markets and market failure) is a natural companion. Students on AQA courses may prefer Economics AQA Unit 1 (Markets and Market Failure).

Moving on to intervention

Once the causes make sense, turn to the responses. The maps Rationale for Government Intervention, Methods of Government Intervention to Correct Distortions to Individual Markets and Government Failure cover what governments do and where it goes wrong. There are also maps on Buffer Stocks and Regulation, plus three on UK competition policy. Notes such as Subsidies and Tax back these up.

Using quizzes and maps together

Work in short rounds:

1. Read one mind map and cover it up.
2. Take a quiz, such as Market failure and government intervention - Quiz, which starts with a question about waste in a river.
3. Note which answers you missed and go back to the matching map or flashcard deck.
4. Repeat a few days later.

Where it sits

This unit belongs to the Markets and Consumers strand of Economics. It pairs well with the broader map on Price Theory. Choose one resource now, or make your own maps and flashcards as you go.