Question

What are sources of market failure? Provide a real-world example What is the rationale for government intervention in economic and market activities? Briefly describe the causes of the Great Depression of the 1930s

Answer 1

1.Market failure happens due to the ineffectiveness in the distribution of goods and services. Sources due to which market failure happens:-

1.​​It can be caused due to negative externalities.

2.It can be caused due to positive externalities.

3.It can be caused due to public goods.

Examples of market failure can be considered as economic failure of any economy. It occurs when resources like land and labour are not distributed effectively by the market.

2. The purpose of Government intervention in the economic and market activities is that it tries to promote economic growth and development, it tries to improve public facilities, it tries to provide a stable rules and regulations, it also helps in improving the infrastructure and many more other things.

3.The causes of great depression were that it caused an ineffectiveness in the economy. It was caused due to the stock market strike. Because of this strike the unemployment rate of American economy was going towards 30% of the workforce. Bank failure was also a big reason, along with this, income of the working class like farmers and workers in the factories, were also low. All these things led towards the direction of depression.

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