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The Notion Of Market Failure & It'S Types

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Market Failure can be split into three different categories, Negative Externalities, Missing markets and Imperfect markets. Market failure occurs when the market for goods or services is unable to efficiently allocate resources.

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A negative externality effects society as a result of economic change where no compensation is paid. The cost is more than the customers are paying for the good or service eg Lead emissions from car exhaust fume. Many people drive cars which can cause pollution but not one person can be blamed.

Missing markets can cause market failure as it is non-excludable meaning everyone benefits from the services and it’s the government’s choice of what to provide which can be funded by paying taxes eg BBC (Public Broadcasts). Merit goods are provided by both the public and private sector as if the government didn’t provide both public and merit goods then not all of society would benefit from the services provided. Those willing to pay a high price can pay for private education or private health care. Merit goods are excludable unlike public goods.

An Imperfect market is when one/more than one organisations have large control of the market. When this happens it can reduce the rivalry and exploit customers as they have to pay for the goods at the higher price due to one company or group of organisations being in charge of the market. With no rival for the organisation, the UK government has to take react and make decisions.

A UK government policy on environment and its success

The policy being examined is the ban of smoking in public places. The smoking ban in public places was introduced in Scotland in 2006 on March 26th 2006 then eventually in England on 1st July 2007. It banned smoking in workplaces, pubs, restaurants, work transport and clubs. Smoking itself has many health side effects such as lung cancer however there is an increasing concern for second hand smokers. The Government’s aim of the policy was to decrease the hazard of passive smoking.

In October 2015 the law was then updated to “protect children and young people from the dangers of secondhand smoke.” It became illegal for someone to smoke in the car with a person under the age of 18. This still exists when a window is down, however it is acceptable if the car is a convertible and the roof is down. The Government uses fines to achieve this policy and anyone caught could be charged up to £50. Any managers or owners who are in charge of a public building can charged up to £200 if someone is found smoking there. All public places must ensure they have no-smoking signs up in their premises which is clearly visible. Smoking in a car can be much worse than in a public building such as bars, as it’s in a small confined space it can create a higher concentration of toxins. This is why it is very dangerous to young children who become vulnerable and have no control over it.

From the BBC News a study found that children’s exposure to second hand smoking in England over the period 1996 – 2007 had declined by almost 70%. This shows that the policy has greatly impacted on children who may have been vulnerable to it before. By not being exposed to second hand smoking it can reduce of making health problems such as asthma and respiratory problems. From appendix 1 it shows that before the ban in public places almost 70% of bar workers had reported a respiratory illness and by 2008, just two years after the ban it had reduced to just 40% of reports. This clearly shows a dramatic change in a healthier lifestyle for those who are affected by passive smoking at their work. It has also be shown that the smoking ban has helped the way people feel about smoking and their attitude towards it.

In conclusion the facts illustrate that the banning of smoking in public places has had a negative impact on the United Kingdom. It was found that in 1974, over 40% of people aged 16 and over smoked in the UK and in 2016 that had reduced to under 20% after the ban on smoking. This impacts not only the individual smoking but those who have been vulnerable to it. It also highlights that the ban has not only prevented smoking in some places but has stopped people smoking altogether. This decreases the amount of people being admitted to hospital due to smoking related health issues and saves the NHS money. It also helps non-smokers vulnerability when they are out in public places as they don’t have to experience the second hand smoking anymore.


  1. https://www.tutor2u.net/economics/reference/negative-externalities
  2. http://economicsonline.co.uk/Market_failures/Merit_goods.html
  3. http://www.politics.co.uk/reference/smoking-banhttps://www.gov.uk/government/news/smoking-in-vehicles
  4. https://www.bbc.co.uk/news/health-18628811AppendixAppendix
  5. https://www.bbc.co.uk/news/health-40444460

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