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THE MARKET FUNCTION AND MARKET FAILURE


1. INTRODUCTION.

When we go to the market and see the variety in the products and the competition between firms, I stop and ask myself, what is the market and how it work and organized, what are the factors that encourage the market to compete and operate which ensure that all the agents of economic obtain profit from market and keep them in the market race.

In our essay we will talk about how the market work through four different schools thought which explain different opinion about the factors which encourage the market to compete and process. Shumpter express that the competition lead to innovation, while neoclassical demonstrate the case of equilibrium price. Hayek theory point the changing in the prices assist to transmit useful information to supplier and consumers. Sen's view points the role of market power in distributing the benefits between the parties.

Also, we can't ignore the cases of the market failure which caused by a number of reasons which require the government intervention to solve the problems to achieve the social goals and improve the market efficiency. Government has objectives as organized economic activity, protect people from the violence and invasion of other societies and protect every person from unfair and persecution of every other member of it (Adam Smith, 1937). Government's role and validity force the free market to allocate the resources with relative efficiency; on the other hand the performance of the government could reverse the social goals which cause the government failure.

2.0 THE MARKET FUNCTION.

The ideology of the liberalism whose essence is free market and privatization announce that the economic policy are obtained a large interest in the market when is isolated from the government intervention (Vivienne Brown, 2002). The market work and improve...