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Homework answers / question archive / How does the failure of one market, to clear, influence supply and demand in related markets?

How does the failure of one market, to clear, influence supply and demand in related markets?

Marketing

How does the failure of one market, to clear, influence supply and demand in related markets?

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In the case where the distribution of goods and services is not sufficient, the situation is referred to as a market failure. Normally, if the supply forces changes in the market, it results in a change in demand in the market. if the change distorts the market, causing a state of prices disequilibrium in the market, the situation affects the related markets. The demand and supply of a related market will be affected out of lack of perfect information in the market and the market control in the market that initially faced market failure. Related markets will face challenges like, where sellers are not really sure about the prices due to lack of information and may be willing to accept low prices than the ones that would meet the costs of business. Additionally, if one market is controlled by a monopoly, and they pressure the market to a point of market failure, the tension is transferred to the related market. for instance, if there is a market failure in the cement market for a while, the real estate market will be affected and it would turn expensive to complete a project. This means that the supply of already complete project will go low, the prices of the few complete ones will be high, and consequently, the demand would go low.