MICROECONOMICS Question 1A. Regulation is often justified in cases where some form of market failure would otherwise create an inefficient allocation of resource. Choose an economy of your choice...

MICROECONOMICS
Q 1A.
Market failure is directly linked to the failure of the pricing system. This circumstance is characterized by an inefficient supply of goods and services. Traditional microeconomics theorydefined it as a consistent state disequili
ium wherein the goods demanded, and goods supplied are not in alignment.
One of the most underdeveloped economies is that of Sie
a Leone. The growth rate is somewhere around 4%. Jackson (2018) explains market failure in Sie
a Leone as it dates back to the 1980s. In this case, the poor intervention of government leads to the collapse of the market.
Another instance in Sie
a Leone would be less scope of welfare advances because of market failure. The investment potential is really less in the country. The monopolistic environment has led to slow growth and co
upt structure (Jackson & Ja
ie, 2019). In this case, regulation is justified, as it will allow the market to be competitive. The improper allocation of resources can be properly distributed then.
There are some possible sources of market failure that may lead to government intervention and regulation of the market.
When organizations are in a position to increase the price and exploit the customers, the market head towards failure. As the companies are in an advantageous position to adopt any methods, they can render them higher profitability. In addition, as they do not face any competition, they are least bothered about customer service and competitive prices. When customers face serious issues, the economy is immensely affected. In such a situation, the market must be regulated to forestall the increase in monopolistic power (Simshauser, 2017). The government may consider some relaxation to allow competition in the market. In addition, motivate companies to enter the segment. This will lead to increase in competition and the firms will be forced to follow a competitive pricing system to survive in the market.
Externality in production may hamper the market proceedings and lead to serious issues. When the production of some goods is affecting the society in a negative way, it must be rightly addressed. For example, chopping trees and destroying forests to make furniture. This social cause will affect the market as people may refrain from using such produces at the cost of environmental exploitation. Here the social cost is excessively much to bear than the production cost of the firm (Jackson & Ja
ie, 2019). Government intervention is required here to limit the activities so that the environment is less affected. Tax on such goods may be increased to reduce consumption. In addition, the government may declare subsidy for...