Causes & Consequences (Cambridge (CIE) O Level Economics)
Revision Note
Causes and Consequences of Market Failure
Market Failure occurs when free market activity results in a less than optimum allocation of resources from the point of view of society
The Causes and Consequences of Market Failure
Cause | Explanation | Consequences |
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Demerit Goods |
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Merit Goods |
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Public Goods |
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Abuse of Monopoly Power |
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Factor Immobility |
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External Costs and Benefits |
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Examiner Tip
When explaining externalities, your syllabus focusses on the external costs and benefits. It does not specifically refer to negative/positive externalities of production or consumption. That language has been included here as it helps to deepen your understanding which will help you to better answer both MCQ and structured questions on market failure. You can use this economic language knowing it will enhance your answers.
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