SACE Economics — Stage 2

Market Failure — Flashcards & Quiz

Market failure occurs when the free market fails to allocate resources efficiently. For SACE Economics Stage 2 you need to explain the main causes — externalities, public goods, information asymmetry, and market power — and evaluate the government responses used to correct them. Strong responses use diagrams (externality wedge, MSB/MSC curves) and link Australian examples like carbon pricing, public health campaigns and ACCC regulation.

Last updated: March 2026