Market Failure
Market failure is an economic concept describing situations where the free market fails to allocate resources efficiently, leading to suboptimal outcomes such as underproduction, overproduction, or misallocation of goods and services. It occurs when market mechanisms like supply and demand do not result in Pareto efficiency, often due to externalities, public goods, information asymmetries, or market power. This concept is fundamental in economics and public policy for justifying government intervention or regulation to correct inefficiencies.
Developers should understand market failure when working on projects involving economic modeling, policy analysis, or platforms with social or environmental impacts, such as carbon trading systems, public health apps, or financial regulation tools. It helps in designing systems that account for external costs (e.g., pollution in environmental tech) or benefits (e.g., open-source software as a public good), ensuring solutions align with broader societal goals beyond pure market dynamics.