Market failure occurs when the price mechanism takes into account private benefits and costs of production to consumers and producers but fails to take into account indirect costs such as damage to the environment. Under the Laissez Faire system market forces may not achieve the desired economic and social outcomes. Some reasons why the government intervenes in the market are because they can achieve more efficient allocation of resources, more equal distribution of income and greater stability in the economy. Public goods are one characteristic of market failure. This is because private companies are not willing to supply this good because they cannot derive a profit from this good. Markets do not take into account the side effects. These side effects are not reflected in the price, this means that the price mechanism has failed. These side effects are called externalities. Monopolisation, price discrimination, exclusive dealings, collusion (e.g. Visy cardboard scandal) and market sharing are all examples of market failure in the abuse of power. The fluctuations of the business ......

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