Question

Which of the following are inefficient markets? Select all that apply.

Answer 1

The situations of market inefficiency are the following

• Consumers wait in line to buy a sale television because the first to come is the first served.

• Consumers gain access to goods through a lottery or wining a contest.

In both situations there is an excess of demand (shortage of offer) beacuse the marketa are inefficient in terms of allocating the goods and services to all the consumers that are demanding them. Rationing mechanisms have to be implemented instead, operating under specific sets of rules such as: "first come, first served", or through the organization of a lottery.

The other two situations do not reflect market inefficiency

• Consumers compete for wages in a free market economy.

Markets are freely functioning and it does not mentioned any disequilibrium situation that involves inefficiencies.

• Consumers all agree and decide to produce certain products they need and want.

A group of consumers decides to become producers and perform the economic roles of this economic agent. This is the everyday life in markets.