EconomicsAQA (7136) / Edexcel (9EC0)Market Failure

Market Failure & Externalities — A-Level Economics

AQA / Edexcel A-Level Economics

Market failure occurs when the free market fails to allocate resources efficiently — a central theme in A-Level Economics. This interactive tool explores the main types of market failure: negative externalities (pollution, congestion), positive externalities (education, vaccination), public goods (non-excludable and non-rivalrous), merit and demerit goods, information failures, and monopoly power. Adjust marginal social and private cost/benefit curves to visualise welfare loss and explore government interventions — taxation, subsidies, regulation, and tradable permits. Aligned to AQA (Section 1.2) and Edexcel (Theme 1) specifications.

Uses Google Fonts (Cormorant Garamond, Inter Tight). Requires an internet connection for full styling.

Frequently asked questions

What is a negative externality?+

A negative externality is a cost imposed on a third party not directly involved in a transaction. For example, factory pollution imposes health costs on local residents. The social cost exceeds the private cost, leading to overproduction relative to the socially optimal level.

What is a public good?+

A public good has two characteristics: non-excludability (you cannot prevent non-payers from consuming it) and non-rivalry (one person's consumption does not reduce availability for others). Examples include national defence and street lighting. Public goods are underprovided by the free market due to the free-rider problem.

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