Build a causal chain from an externality, information failure, free riding or monopoly power to overproduction, underproduction or another inefficient allocation of resources.
Advances in technology have changed how trees (wood) are cut down, transported and used in the manufacture of furniture, such as tables. Wood is in inelastic supply. Wood can be supplied in all economic systems. However, public goods are not supplied in a market economic system.
Explain why public goods would not be supplied in a market economic system.
Explain why public goods would not be supplied in a market economic system.
Logical explanation which might include: Public goods are non-excludable (1) it is not possible to stop people who are not prepared to pay for them, from consuming them (1) free rider problem (1).
Public goods are non-rival (1) if supplied for one, supplied for everyone and so cannot charge additional consumers (1).
Private sector firms are profit motivated (1) they will not produce products if they cannot get revenue from them (1) would make a loss (1).
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No marks for examples.