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Cambridge IGCSE Economics practice

Paper 2 structured question: Market failure

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Market failure

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Paper 2Structured Questions2 marks

Understanding the implications of market failure is essential for economic policy.

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Implications of Market Failure

Market failure can lead to inefficient resource allocation and a loss of economic welfare. It is important to recognize the different types of goods and their impact on society.

  1. a

    Explain the difference between merit goods and demerit goods

    Aim for approximately 2 distinct marking points.

    [2]

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Paper 2 structured question: Market failure

Paper 2Structured Questions1 marks

Description

Understanding Market Failure

Market failure occurs when the allocation of goods and services by a free market is not efficient. Key concepts include public goods, merit goods, demerit goods, social benefits, external benefits, private benefits, social costs, external costs, and private costs.

  1. a

    State one reason why market failure occurs

    Aim for approximately 1 distinct marking point.

    [1]