Question

Question 20 12 pts Describe the 4 causes of market failure.  Why is it safe to assume that the government will continue to provide food stamps to poor people? HTML Editore 321 X X, SEE BIVA - A - I E

Answer 1

The Four Main Causes Of Market Failure Are-

A>Externalities which are negative ;- effects caused by decision of a third party , which is not taken into consideration by the person who is the decision maker. and the decision which is bad or detrimental to others is known as negative externalities . Ex. Carbon monoxide emissions.

B>Regulations :- Regulation is vital for any market. and when certain regulation imposes certain restrictions like price ceiling and price floor , which affects the price mechanism which does not work efficiently allocating the resources.

C>Imperfect Information - Here in the real world, when the buyer and the seller does not have similar or equal information and because of this imperfect information, it can cause a market to fail.

D>Free ridership program - when the distribution of goods are inefficiently distributed among people, where some people are allowed to consume more than what they deserve from the shared resource than other people.

--It is safe to assume the government will provide food stamps to poor people because the main function which is maintained by the government is the welfare functions provided to the citizens. Human development Index is where a country is rated for its human development programs and one of the most important feature here in the index is health of its citizens. Here the people are rated by high or low income households by these categories.

That's why to provide a comfortable healthy living to the poor people is compulsory and for healthy living of its citizens , food plays a vital role and is a important component .