What term is used for situations where the market does not achieve the desired results?

The term "market failures" is used to describe situations where the market does not achieve efficient outcomes or fails to allocate resources optimally. This can occur for various reasons, such as the presence of monopolies, public goods, externalities, and asymmetric information.

In the context of economics, a market is considered to be functioning well when prices reflect all available information and resources are allocated in a way that maximizes total welfare. When market failures occur, it often means that some participants are left worse off, and the overall efficiency of resource use diminishes. For example, in the case of negative externalities like pollution, the costs imposed on society are not reflected in the market price of goods, leading to overproduction of harmful goods.

Understanding market failures is crucial for policymakers, as it provides insight into when government intervention may be necessary to correct inefficiencies, redistribute resources, or regulate negative externalities to achieve better outcomes for society.