According to Wikipedia, there are three main causes of market failure: externalities, monopolies and non-excludability. Externalities refer to a situation where the activities of an entity generate side effects for which the entity has made no provision. One example of an externality is pollution generated as a side effect of vehicle operation. Without measures such as road tolls, most people would operate vehicles without regard for the pollution they generate.Know More
Another example of an externality is the pollution that is the side effect of industrial activities. Without taxes, regulations and similar measures, there would be little incentive for industries to make provision for the side effects of their activities, despite their negative effect on others. The concept of externalities is used to justify the intervention of governments and other overarching organizations in market operations, according to David Pannell of the University of Australia. Failure to enact regulations would result in the general society bearing the cost of negative side effects and offenders failing to pay for the cost of their operations. Such offenders could then sell their products at lower prices than they should.
Another cause of market failure is non-excludability. This refers to a situation where individuals or organizations cannot stop non-buyers from obtaining certain products or services. Such products or services are said to display the attributes of public goods. One example is open-source software. Creators of such software cannot stop others from using or even modifying their creation. If the situation is inadvertent rather than deliberate, it would result in underinvestment in the particular product or service.
Monopolies refer to a situation where an entity or a small group of entities gain excessive market power. Monopolies are an excellent example of market failure. Other causes of market failure include the uneven flow of information and lack of property rights, according to the University of Melbourne.Learn more about Investing
A "stock market" is any type of exchange where stocks or shares are bought and sold. The term "the stock market" is often used colloquially to refer to the world's biggest stock exchanges such as the New York Stock Exchange.Full Answer >
"Calls" and "puts" are types of options for trading stocks. An option gives the buyer of the option the right to buy a stock from (a call option) or to sell a stock to (a put option) the seller of the option at a specific price, called the strike price.Full Answer >
The New York Stock Exchange and Nasdaq Stock Market, which are the two exchanges that are most often considered the stock market, both close early every year on November 27th and Christmas Eve Day, according to The Street. On each of these days, the markets have closed at 1 p.m. Eastern Time.Full Answer >
A gold spot market is a market where professional gold dealers buy and sell gold to each other and transactions are settled immediately. This distributed market, which is composed of gold dealers from across the world without a physical location, is governed by a set of rules and standards.Full Answer >