Practise market-failure concept questions by spotting why resources are inefficiently allocated in a short MCQ context quickly.
The Tallinn Song Festival Grounds (TSFG) is a popular live music venue in Estonia and can hold 65,000 people. Although it is very popular there are only a few firms selling food and drink at the TSFG venue.
The lack of competition at the TSFG venue means that service is slow and queues are long. Food and drink prices are expensive and security checks mean that no food and drink can be brought in from outside the TSFG venue.
With reference to the data above and your knowledge of economics, analyse how market failure is likely to occur at the TSFG venue.
AO2 (3 marks)/AO3 (3 marks)
AO2 and AO3
- Market failure exists where resources are not allocated efficiently
- Examples of market failure include externalities, missing markets, lack of information, factor immobility and lack of competition
- There is a lack of competition selling food and drinks at the TSFG, meaning customers have limited choice of where to buy refreshments inside the grounds
- This means higher prices can be charged because customers cannot get refreshments anywhere else
- As people spend several hours at the venue, they are likely to need something to eat and/or drink during their visit
- Therefore, the high prices and reduced choice leads to an inefficient allocation of resources
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-2
- Demonstrates basic knowledge and understanding by developing relevant points. Limited application of economic terms, concepts, theories and calculations (AO2).
- Information presented will lack selectivity and organisation. Interpretation of economic information will be limited, with a lack of analysis of issues (AO3).
Level 2
3-4
- Demonstrates partial knowledge and understanding by developing relevant points. Partial application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate some selectivity and organisation. Interpretation of economic information will be good, with some analysis of issues (AO3).
Level 3
5-6
- Demonstrates clear knowledge and understanding by developing relevant points. Appropriate application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate excellent selectivity and organisation. Interpretation of economic information will be excellent, with a thorough analysis of issues (AO3).