Market Failure

Filed Under » ,
Dictionary Says

Definition of 'Market Failure'

An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium.
Investopedia Says

Investopedia explains 'Market Failure'

Market failures have negative effects on the economy because an optimal allocation of resources is not attained. In other words, the social costs of producing the good or service (all of the opportunity costs of the input resources used in its creation) are not minimized, and this results in a waste of some resources. 

Take, for example, the common argument against minimum wage laws. Minimum wage laws set wages above the going market-clearing wage in an attempt to raise market wages. Critics argue that this higher wage cost will cause employers to hire fewer minimum-wage employees than before the law was implemented. As a result, more minimum wage workers are left unemployed, creating a social cost and resulting in market failure.

Related Definitions

Search results for

'Market Failure'

  • Free Markets: What's The Cost?

    http://www.investopedia.com/articles/economics/08/free-market-regulation.asp
    ... Despite its successes, there are also several historical examples of free
    market failure. For example, since the cable industry ...

  • A Practical Look At Microeconomics

    http://www.investopedia.com/articles/economics/08/understanding-microeconomics.asp
    ... Market Failure and Competition While the term "market failure" might conjure up
    images of unemployment or a massive economic depression, the meaning of the ...

  • Profit From The Fed's Failure

    http://stocks.investopedia.com/stock-analysis/2009/Profit-From-The-Feds-Failure-SDS-SPY-SLV-ZSL0811.aspx
    ... Profit From The Fed's Failure. ... Get Free Stock Analysis By Email. IN PICTURES: Eight
    Ways To Survive A Market Downturn Naturally, the Fed's actions have caused ...

  • Relative Strength Index And Its Failure-Swing Points

    http://www.investopedia.com/articles/technical/03/042203.asp
    ... Even one step further is the failure swing, a term that Wilder uses to refer to
    "very strong indications of a market reversal." Wilder uses failure swings to ...

  • Auction Rate Securities: Bidding On The Long Run

    http://www.investopedia.com/articles/bonds/08/auction-rate-securities.asp
    ... In the months following the ARS market failure, several investment banks faced
    investigations for marketing ARSs to investors as a safe alternative to cash. ...

  • Adobe's Failure To Launch

    http://stocks.investopedia.com/stock-analysis/2009/Adobes-Failure-To-Launch-ADBE-MSFT-IBM-AAPL0622.aspx
    ... to learn more about predicting sales) The Bottom Line Despite the failure to launch ...
    tech space keen on upping their game in the fast-growing market for digital ...

  • Bank Failure: Will Your Assets Be Protected?

    http://www.investopedia.com/articles/stocks/08/sipc-fdic-bank-failure.asp
    ... There may be other, market-related reasons for this, but this is worthy of further ...
    and the SIPC become involved in the case of a bank or brokerage failure. ...

  • HHGregg Looks For Success Where Most Find Failure

    http://stocks.investopedia.com/stock-analysis/2011/HHGregg-Looks-For-Success-Where-Most-Find-Failure-HGG-BBY-WMT-TGT-AMZN-GME-AAPL0530.aspx
    ... HHGregg Looks For Success Where Most Find Failure. ... Surprising Good Results Given
    a Tough Market The best way to categorize hhgregg's fiscal fourth quarter is ...

  • Becoming A Chartered Market Technician

    http://www.investopedia.com/articles/professionaleducation/10/market-technicians-association.asp
    ... ethics portions on the CMT level three exam means automatic failure of the ... application
    of technical analysis, ethics, Dow Theory and inter-market analysis, to ...

  • Are CDs Good Protection For The Bear Market?

    http://www.investopedia.com/articles/bonds/08/CD-certificate-of-deposit-recession-bear-market.asp
    ... unions. Knowing how much insurance you have against bank failure is essential,
    especially when the stock market is not faring well. It ...

Related Articles

Trading Center
Partner Links