How do markets fail?

Question

How do markets fail?

Answer 1

market failure occurs when production leads to externalities, externalities occur when a third party is affected by the decisions and actions of others.

positive externality occurs when social benefits is greater than social costs... a third party gets benefit from the consumption or production of a good... to increase production/consumption of such goods government give subsidies.

negative externality occurs when social costs is greater than social benefits... a third party gets harm from the consumption or production of a good... to decrease production/consumption of such goods government give impose taxes.

Answer 2

Markets fail during times of extreme irrational exuberance.. Logic no longer prevails. Only the winds of the day until the last sucker buys at the highest price. After that, pure fear of losing everything grips the market and you have everybody running for the exit at once. BOOM!!!!   Down goes the market. Firms and Businesses fail. Employees are laidoff. Everybody suffers..

....

The Dust settles and businesses find willing and able cheap labor. Investors jump on rising values of businesses growing. The whole cycle begins again....

Answer 3

the whole system is intirely based on trust.  from the bottom to the top of the system you have to believe that companies are telling you the truth and are acting in your best interests if you are a shareholer of bondholder or other type of investment in that company.  markets fail when that trust is broken or you think it has.  it could happen to one company or sector of companies or the entire market.  the wider the distrust the more it has an effect on the market.  think panic selling - which can happen to one company or a large group or sector.  total panic equals total collapse.

Answer 4

Listen to Alby... once a market fails it can't get started until the market finds, he says, "willing and cheap labor"...

How come there are no willing and cheap management workers?

Oh yes, because they MUST have obscene salaries.

Your system is broken and the public is being destroyed by the greed of the few.