Market Failure Essay

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What is market failure?

In economics, market failure is a situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.

Types of market failure

    1. Monopoly and oligopoly
    2. Externalities
    3. The provision of public goods
    4. The use of common resources
    5. Income redistribution

The economic problem that I choose is of type Monopoly and oligopoly

In around 2009, India was battling with high food inflation. It was around 20%. Such high inflation creates strains. The wholesale food prices in India reached 19.95% which was the highest in 10 years.

The reasons for the high food inflation were

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In 2008, it was assessed that India lost INR 58,000 crore worth of rural sustenance things because of the absence of a post-harvesting framework, for example, cold chains, transportation, and storerooms. If the Government guaranteed legitimate storerooms, nourishment stock would have been more than adequate prompting costs to stay leveled out. One can’t say whether the Government is as yet doing what's needed to have appropriate storerooms in the nation.

The Indian farmers are to a great extent reliant on the four-month monsoon season amid which 80% of the year's all-out precipitation happens. The reason is that 60% of the nation's farms are not irrigated. The Government has again been discussing comprehensive development and weight on rural India. These realities don't point to any significant endeavors to help farmers in a nation where more than 10,000 farmers have committed suicide in the most recent decade.

What did the government do?

During such high occasions, previous PM Manmohan Singh assembled a conference of authorities to raise an answer for this issue. Kaushik Basu was available at that gathering. He brought up that in India, farming items are gathered by the Food Corporation of India (FCI), and their stock is used if there should be an occurrence of shortage and swelling. The typical method to convey grains by FCI is to advance 1000 metric tons and call for closeouts. Unfailingly, 5– 6 major merchants offer and remove the stock. The issue with such sort of appropriation is that it makes a plot among those couple of enormous sellers and makes an oligopoly, which sets more expensive rates.

The solution offered

The arrangement proposed in the table was straightforward: Instead of selling at 1000 metric tons, close to 100 metric tons or even in quintals. Following this usage, costs descended. The reason for this is selling at lower sums enabled smaller merchants to offer in. Given the extensive number of merchants holding the stock, the plot ended up troublesome and the costs descended because of rivalry. About pondering expansion, individuals generally think toward cash supply, loan fees, less creation, and so on. It was astonishing that the answer for expansion was brought by a little change in the market structure.

There are numerous such territories in India where markets are not working proficiently and thus, inquiries about is embraced by financial specialists to indicate these wasteful aspects and correct them.

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Market Failure Essay. (2024, February 28). Edubirdie. Retrieved April 20, 2024, from
“Market Failure Essay.” Edubirdie, 28 Feb. 2024,
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