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Market Failure + Externalities

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A Levels Economics (Unit 1 - Microeconomics) Mind Map on Market Failure + Externalities, created by christian525 on 09/04/2014.
christian525
Mind Map by christian525, updated more than 1 year ago
christian525
Created by christian525 about 10 years ago
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Resource summary

Market Failure + Externalities
  1. Complete
    1. missing markets
    2. Partial
      1. produces wrong quantity
        1. wrong pricing
        2. Causes of Market Failure
          1. neg. externality
            1. MSC exceeds MPC
            2. pos. externalities
              1. MSB exceeds MPB
              2. Imperfect information
                1. merit goods underproduced
                  1. demerit goods over-produced
                  2. market dominance by monopoly
                    1. leads to under-production and high prices
                    2. Factor immobility
                      1. causes unemployment
                        1. lower productive efficiency
                      2. Externalities
                        1. third party effects
                          1. occur outside market

                            Annotations:

                            • i.e. people not directly involved in production or consumption
                            1. Positive
                              1. MSB > MPB
                                1. good underproduced
                                2. Negative
                                  1. MSC > MPC
                                    1. leads to overproduction
                                    2. smoking
                                      1. litter
                                        1. food waste
                                          1. pollution
                                            1. impact on health
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