Market Failure and Other Topics in Economics that You Must Note Well!

By Michelle Johnson
4 Apr, 2018

Economics is the study of the various interactions between the production, distribution, and consumption of various resources between individuals. With manuals as other topics in economics homework answers, you can get insight into other facets of this subject.
Various parts of this subject:
The science of Economics can be divided into two parts namely:

  • Micro Economics

Micro Economics is concerned with the study of the individuals and their interaction with the markets of demand and supply of commodities. Such individuals include the private consumers, households and local markets of demand and supply.

  • Macro Economies

Macro Economics refers to the study of various economic elements in the entire economy. The elements include the total production and distribution of goods, services and the transference of wealth within a country.
Points to note about this subject:
Here is a set of queries that you must note for knowing the other facets of this subject.

  1. What are the major topics in Economics?

The study of the science of Economics is a wide subject with no clear boundaries but the most frequently referred to topics are:

  • Demand and Supply of Goods
  • Price Changes
  • Issues and factors relating to unemployment
  • GDP of a country and different economic indices
  • Market failure and other topics in economics homework answers


  1. What do you mean by other topics in Economics?

As Economics is a wide subject, there are a lot of different topics in it which have varying levels of relevance. With the increase in the technological aspects of the human world, some topics are becoming less frequent or irrelevant. But there are some other topics in economics homework answers which though not central to the subject, have a lot of importance to the Economic World. Some of these topics are:

  • Market Failure
  • Random Walk Hypothesis
  • Behavioral Economics


  1. What is market failure?

The usage of the term Market Failure refers to the conflict arising due to the imbalance between the demand and supply of goods or resources in a market. Such a market failure can result in high prices and inflation. The imbalance in the allocation of resources can lead to an increase in the unemployment levels in an economy. Market Failure and similar other topics in economics homework answers help to determine the efficiency of a market.

  1. What are the reasons for market failure?

The failure of a market can take place due to various reasons are so given below is a list of a few of them:

  • Positive Market Externalities

Market Externalities refer to the action or beliefs of an external party that affects the markets. Such externalities can be either positive or negative in nature. A positive externality like better education can lead to the reduced consumption of goods that have an adverse effect on the human body like reduction in the population of cigarette users.
When such a change takes place in the population, it can lead to the failure of the cigarette market as production will fall, and subsequently prices and profit will go down too.

  • Negative Market Externalities

Negative Externalities like pollution and corruption can lead to market failure as the pollution will lead to lesser usage of cars and automobiles while rampant corruption can lead to consumers not buying overpriced commodities distributed by the governments.

  • Monopolization of market

The monopoly of a market may be beneficial to the supplier to a certain extent can be a loss for them in the long run. The monopolization of the market and similar other topics in economics homework answers can lead to the under-production of goods and products, and their subsequent higher prices may act as a deterrent to buying such products.

  • Immobilization of the factors

The immobilization of the factors of production is the non-transference of the production resources to the production and distribution units in the economy. It can lead to falling in the income level of the consumer due to unemployment, and lesser savings of the consumers or lowering of the wage rate can result in fall in the demand for goods and products thus leading to market failure.

  1. Define Random Walk Hypothesis

The Random Walk Hypothesis is basically related to the world of finance but is an important part of the other topics in economics homework answers. It is related to the movement of stock prices in a market which increases or decreases without any prior indication and thus is like a random walk which can lead to anywhere. This hypothesis is based on the assumption of the efficient market. It shows that the movement of the prices of the stocks in an efficient market move as per their different forms of information available.

  1. What are the different forms of the Random Walk Hypothesis?

The hypothesis of the Random Walk is based on its three different forms which are as follows:

  1. Weak Form

In this form of the Random Walk Hypothesis, no prior information available with regard to the movement of the stock prices can predict the future movements of the stock. This form is the complete opposite of the technical analysis which relies on the past movement of the prices.

  1. Semi Strong Form

In this form, any assumptions made by the analysts or traders of the movement of the stock prices will not lead to any definite movement of the stock price in the believed direction even if the knowledge of the concerned person is superior or confidential as the price will be auto-corrected with regard to the multitude of factors already present and in effect.

  • Strong Form

This form of the hypothesis says that due to the efficient nature of the market all information regarding the prediction of the movement of the stock prices is available to every member of the market. Hence due to the widespread availability of the information, no trader or analyst will have any superior knowledge thus it won’t deprive other members of a similar return from investment.

  1. What do you mean by behavioral economics?

The term of Behavioral Economics is the overlapping of the Economic world with the world of human psychology. As humans are one of the most important resources of the Economic world a lot of changes in that world are brought on by the human population’s interaction with the various forces of the market. In Behavioral Economics, the economists study the impact of human psychology on the economic elements and the effect of such an impact.  This is one of the other topics in economics homework answers which holds a lot of importance in the economy.

  1. What are the effects of Behavioral Economics?

When human psychology takes precedence when making economic decisions it results in the following economic effects:

  • Changes in Price Level

The Price Level in an Economy is determined by the interaction of the demand and supply of the product in question. Such demand and supply take place as per the choices of the consumer. When the consumer decides to purchase more of a product, it creates a demand for it in the market which results in the inflation of its price and vice versa.

  • The Veblen Effect

The Veblen Effect refers to the demand for a product or a service which is luxurious in nature and not necessarily a need of the consumer. Such products are also known as Veblen Goods as their demand is created in the market due to the want of elevating one’s social status. Association or usage of such goods is deemed as a higher level of prosperity in the society and thus demanded to quench one’s social thirst.

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