<P> In economics , market failure is a situation in which the allocation of goods and services by a free market is not efficient , often leading to a net social welfare loss . Market failures can be viewed as scenarios where individuals ' pursuit of pure self - interest leads to results that are not efficient -- that can be improved upon from the societal point of view . The first known use of the term by economists was in 1958 , but the concept has been traced back to the Victorian philosopher Henry Sidgwick . Market failures are often associated with time - inconsistent preferences , information asymmetries , non-competitive markets , principal -- agent problems , or externalities . </P>
<P> In economics , market failure is a situation in which the allocation of goods and services by a free market is not efficient , often leading to a net social welfare loss . Market failures can be viewed as scenarios where individuals ' pursuit of pure self - interest leads to results that are not efficient -- that can be improved upon from the societal point of view . The first known use of the term by economists was in 1958 , but the concept has been traced back to the Victorian philosopher Henry Sidgwick . Market failures are often associated with time - inconsistent preferences , information asymmetries , non-competitive markets , principal -- agent problems , or externalities . </P>
a situation in which a market left on its own fails to allocate resources efficiently is known as
a situation in which a market left on its own fails to allocate resources efficiently is known as
market failure
market failure