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Assessment task 3

Q1, The term market failure is an economic situation when the free market of public goods, merit goods, externalities and imperfect competition is failed by the inefficient amount of trading often leading to a net social welfare loss. Market failures can be seen as scenarios where peoples general needs leads to results that are not efficient to the economy. If evaluating market failure on as microeconomics scale it would show a steady state of equilibrium in which the quantity being supplied does not equal the quantity of which is demanded. The cause of market failure leads to government failure which government interventions, such as taxes, subsidies, bailouts, wage and price controls, and regulations, will lead to an inefficient allocation of resources, sometimes called government failure which I will now talk about the four main factors which influence the role of the governments. The first one would be failure of public goods/services this summed up in general would be when two properties do create a situation in which people want something (and are willing to pay for it), but no firm will find it profitable to provide the good this for an example relates to the government as such which is why they undertake having to provide something which is a market failure for example NHS, fire rescue services, armed forces and public transport for example. Next in according to government market failure would be merit of goods. A merit good is a product that society values and judges that people should have regardless of their ability to pay. In this sense, the government is acting paternally in providing merit goods and services. Individuals may not act in their own interest because of imperfect information. An example of this which relates to the government would be people not paying for private education or private health care therefore the government would have to subsidies to make sure everyone has this, summed up without the rival firms reduces availability to others hence how it affects the government and leads to market failure. Externalities occur when there is an inefficient allocation of resources in a free market. Market failure can occur due to a variety of reasons, such as monopoly (higher prices and less output), negative externalities (over-consumed) and public goods (usually not provided in a free market). This would have a relation to the government if they were to interfere with political references, taxation etc. leading too third party’s being affected by the decisions and actions of others. The final factor in relation to the government is imperfect competition which is when firm with no competitors in its industry. A monopoly firm produces less products, has higher costs, and sells its product for a higher price than it would if rivalled by competition. These negative outcomes usually generate government regulation to get involved as the government is allowing this company to dictate the market and sell ridiculous prices which is why the government intervenes to stop this market failure.

My chosen policy through the government is based on the environment. The policy is called “Packaging waste and environmental responsibilities”. This policy selected has regulations aimed to minimise the amount of waste packaging created and ensure that packaging can be reused, recovered or recycled. They are enforced by the Department for the Economy (DfE). They apply to all packaging. The government has been using instruments to achieve this policy by laying benchmarks and strict rules on this such as reusable packaging must be capable of being used several times. Once at the end of its useful life, it must also meet the requirements for recycling, energy recovery or composting. Amount of materials used so packaging must meet the minimum weight and volume needed to keep the product safe and hygienic,         Hazardous substances such as mercury, lead and chromium are not to be used to package a product. A recyclable packaging must be designed so that a certain percentage of the materials used are recyclable. These instruments and the chosen policy are relatively new to the UK so the policy is still taking time to adapt to the country therefore making facts on the research restricted to determine its success or failure. However I did find an interesting facts online which perhaps tells the policy is swaying to a success that I will quote web page in reference. “That in the year 2016 over 61% of the UK’s packaging was recycled during 2016 year ending December”. This fact shows more than half of the packaging is getting recycled and leaves me to evaluate the “Packaging waste and environmental responsibilities” has so far been a success story within the UK.