Market failure is the situation characterized by the fact that the market can not fulfill its one or more functions. The result of this failure is the total collapse of the market. Specific groups of goods and services disappear or become sold for the increased prices.
Market failure is also associated with the imperfectness of the market and the shortage of the fair competition between the participants of the market. The market failure can occur because of various factors. First of all, the manufacturers of the particular product fail to inform their clients about the actual quality of their product. In simple words, they cheat and lie about the quality of the product, and when customers discover it, they think that the whole line of this product from different manufacturers is of the poor quality.
As a result, they stop buying the product, and the manufacturers of the quality goods lose their clients, and only the poor quality production remains on the market.
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Market failure most frequently happens when the balance on the market is ruined. For example, if the transaction expenditures are quite high, the usage of the market stops to be costless. Finally, the irrational behavior of the participants of the market can cause failure, because if one stops receiving profit from the transactions on the market, there is no need to continue selling this product any longer. Market failure can also be caused by the unfair competition, or monopoly when one company manufactures the unique product and no one else can produce it.
Market failure is a complicated and delicate problem which requires understanding, and the student who has decided to prepare a proper term paper should devote much time to research the issue in detail. A successful term paper should be logical, informative and exciting. The student is supposed to explain the meaning of the term “market failure,” dwell on the cause and effect of this situation, study the aspects and principles of the problem, find out about the solution of the issue and defeat of the market failure with the help of the efficient methods.
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