Topics: Resource allocation, Allocation, Market failure Pages: 2 (332 words) Published: March 4, 2013

1. Define the term ‘market failure’. Market failure is when the market fails to allocate resources efficiently to maximise the satisfaction of society’s needs and wants. 2/2 good job buddy

2. Identify and describe three types of market failure.

* Underproduction of socially desirable public g+s. These g+s are those deemed to be important for all people to access and include public and merit goods. These are provided by the govt for the benefit of the general community. * Overproduction of socially undesirable goods and services. These g+s are considered harmful so unrestricted consumption is not desirable. It is believed some consumers are not sufficiently mature, aware and educated about the dangers of unrestricted consumption. * Market Power. Happens when the level of competition is weak, which occurs in market structures such as monopolies and oligopolies. * 6/6 fancy answer

3. Identify which type of market failure is caused by the production and consumption of tanning salons that use solariums. Justify your response. An overproduction of undesirable goods and services. Salons are now considered to be harmful so consumption is now undesirable. It is usually caused by consumers not being fully informed or discerning about the product. 2/2 swell answer

4. ‘If the legislation before the Victorian Parliament is successful and sunbeds are banned from 2015, this will result in a more efficient allocation of scarce resources.’ Do you agree or disagree with this statement. Justify your view.

Yes, I agree with this statement. As a result of sunbeds being banned, demand for substitutes will increase. For example, tanning creams and lotions. This will increase the relative price of substitute tanning products therefore sending a signal to producers that substitutes have become more profitable. Producers of substitutes will produce more substitutes as a result of...
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