Microeconomics Theory and Application - Assignment

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Market failure
Microeconomics theory and applicationIt can be said that the strength of microeconomics comes from its simplicity structure andwith the close touch with real world. Supply and demand comes in microeconomics and the waythey interact with different market and market failure. Arnold set standard of balanced, clear andthrough coverage of economic principles Polanski, (2018). Most of the markets are notsuccessfully because of some reasons such as in the real world, markets are not perfect accordingto the demand and supply. Market failure occurs when MSC does not equal to MSB. In additionto this, insufficient procedures do not produce process where the average cost is minimum.Supply and demand Ballard & Johnson, (2017) competitive forces not produce quantities ofgoods in which the price reflects marginal benefits. This will leads towards over or underconsumptions of goods and services. Under-provision of merit goods, lack of public goods,externalities are some examples from which the market failure occurs effectively.The basic concepts of microeconomics application are demand function, consumerequilibrium, customer behaviour, market equilibrium Bergman & Rogers, (2017).Microeconomic factors are related to resource allocation in which societies find ways fromwhich they are able to find solutions towards their welfare. These factors are related to themarket place where goods and services plays an important role.Illustration1: Microeconomics TheorySources: Chand, 2018
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