Type of Market Failure – Assignment Example
The paper "Type of Market Failure" is a worthy example of an assignment on macro and microeconomics. The situation highlighted in the article is that of the minimum wage. Usually, a measure to eradicate the level of inequality in a society, Senators voted against the increase in making the minimum wage to $10.10/hour from the existing $7.25/hour because they believe that it will increase the cost of hiring, leading to a widespread lay-off trend which could impact the job market negatively (Koff). The current minimum wage is seen as an attempt to recover from the economic crisis at a snail’s pace but still recovering. The opposition believes that this was a selfish move on the senators’ part because they do not think about the increased standards of livings of the masses which could result from the increase. Critiques also highlight the senators’ action to have their own income raised some time back, questioning the hypocrisy. The market poses two scenarios where the minimum wage increase can lead to a better standard of living for a majority of the people and also cause many people to lose their jobs as hiring would become expensive. Thus, this is a case of public goods market failure because the consumption of additional income by the salaried class would prevent many others from earning altogether. In this case of market failure, the rivalry in consumption is high and so are the chances of one foregoing availing it if the other consumers. Market efficiency can only be achieved if the government intervenes to enhance the pool of resources making the availability equal and improve the market outcomes to allocate the funds more efficiently.