7.3 Efficiency and market failure

The fashion industry employs around 75 million workers, many of whom earn very low wages and work up to 16 hours a day. The industry contributes to 20% of global wastewater and 8% of all carbon emissions. 60% of clothes are made from plastics, 83 million tonnes of the 100 billion garments produced are sent to landfill, and only 20% are collected for recycling.

Consider to what extent an equitable solution can be found for market failures in the fashion industry.

Market failure is to blame for climate change and the inefficient allocation of resources. The only solution is for governments to intervene to improve resource allocation.

Assess the extent to which you agree with this statement. [20]

Traffic congestion is a cause of allocative inefficiency.

Evaluate, with the help of diagram(s) two policies that a government may introduce to reduce the problem of allocative inefficiency caused by traffic congestion. [20]

With the help of a diagram, consider whether economic efficiency can be achieved without government intervention in a market economy. [20]

Evaluate the perspective that privatisation consistently enhances the allocation of resources within a country. [20]

The use of air travels leads to market failure caused by negative externalities.

With the help of a diagram, assess the extent to which a government can intervene to correct this market failure. [20]

Pareto optimality can only be achieved when an economy is both productively and allocatively efficient. This will create a more equitable society.

b) Discuss the extent to which you agree with this statement. [13]

a) Explain what economists mean by a public good and discuss why the provision of such a good is associated with market failure. [12]

a) Explain what is meant by dynamic efficiency and consider which type of market structure is most likely to achieve dynamic efficiency. [12]

a) What is meant by 'efficiency' in relation to the use of resources? [12]