Economics presentation on market failure

Ramita, Saadiya, Sera and Megan

Consequences of Monopolies

|Goods and services with significant external benefit may be under-provided|

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Index

What is a monopoly?

What regulations can govermnets implement to reduce this consequence?

Case study analysis

What is market failure?

Case Study

Summary

Why are Goods and services with significant external benefit under-provided due to market failure?

Case study

What is a monopoly?Megan

A monopoly is when a company controls an entire market for a specific good or service. It means that there are no other competitors, giving this company complete control over pricing, distribution and production. Which can then lead to higher prices, less incentive to innovate/invest, productive inefficiency, restricting supply, reduced choice and potential diseconomies of scales.

What is market failure?Megan

Market failure occurs when the free market system fails to function as intended. The goal of the market is to allocate resources efficiently by letting the interaction of supply and demand decide prices and quantity. Sometimes, the market doesn't take into account of all of the costs and benefits of a product. Which can then lead to, important products that contribute to improving society, such as clean air or education, being under-provided or it might result in situations where the market offers an excessive amount of something harmful to society, like unhealthful food or pollution.

Why are Goods and services with significant external benefit under-provided due to market failure? Saadiya

There are many reasons why goods and services with external benefit are mainly underprovided due to market failure. Reasons of why these goods and services are underprovided is that their too expensive and underproduced to be provided. For example, Vaccine's have a huge external benfefit to the world and help us fight numerous diseases. Due to them being expensive, private firms raise prices of the vaccine causing people that really need the vaccine to be anti-vax as it isnt affordable, causing it to then be underprovided and under consumed in a free market economy.

What regulations can govermnets implement to reduce this consequence?Saadiya

Governments can implement regulations in order to reduce these consequences like providing subsidies to motivate production and consumtion of goods and services with positive externalities. The subsidies can lower the prices or products making both the producer and consumer happy and let them initiate external benfit. Another regulation they can impose is public awarness regulations. Governments can invest in public awarness campaigns that educate people about the external benefits asossiated with the good or service. They can influence the public and encourage demand for goods and services with external benefits.

Case Study: Sera

The COVID-19 vaccine is a prime example of goods with a significant external benefit being underprovided due to monopolies, although there was never a pure monopoly, Pfizer and Moderna combined owned over 80% of the total market share.

As you can see here Pfizer owns a majority market share

Moderna comes second only to Pfizer, also owning a significant market share

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Case study: Sera

Due to the intellectual property rights that both Pfizer and Moderna refused to waive, the COVID-19 vaccine market faced an oligopoly, where Pfizer and Moderna owned over 80% of the total market share of the COVID-19 vaccine. This caused the prices to be driven up as they were creating an artificial supply, which resulted in the vaccine being unprovided. 3rd world countries struggled as they didn't have the money to buy vaccines unlike countries such as Israel which spent an estimated $28 per dose.

Case Study analysis- Ramita

Consequences of an external good, such as an vaccine being underprovided and the measures government is forces to take to prevent market failure.

Summary- Ramita

1 What is a monopoly and market failure?

Monopoly: A market structure characterized by a single seller that faces no competition, as its the sole seller of goods with no close substitute. Market Failure: Its the consequences of a market economic system i.e. inefficient allocation of resourves and a reduction of economic and social welfare.

2. Why are products with external benifits being underprovided?

Monopoly allows firms to raise their prices and this becomes unaffordable for many individuals, and sometimes even countries, leading to it not reaching the mass population, thus taking away its actual value/benifits.

3. Government efforts

• Subsidies
• Set price caps
• Invest in public awarness campaigns

4. Real Life example

• Underprovision of COVID vaccines making countries like Africa and DRC suffer

• Health care cost rising
• Low output, impacting trade and national economy
• Decrease of a 4.1M labour workforce

EconomicsMarket Failure, Cause 7

Thank you

Ramita Diwan, Saadiya Guha, Sera Sharma and Megan Daniels

Citations

- A Shared Understanding for Equitable Access to Vaccines. cdn.who.int/media/docs/default-source/immunization/vaccine_access_market/global-vaccine-market-report-2022-template-final2.pdf?sfvrsn=5e8ddbed_6&download=true. ‌ COVID-19, in. “Monopolies Causing ‘Artificial Rationing’ in COVID-19 Crisis as 3 Biggest Global Vaccine Giants Sit on Sidelines | Oxfam International.” Oxfam International, 25 May 2022, www.oxfam.org/en/press-releases/monopolies-causing-artificial-rationing-covid-19-crisis-3-biggest-global-vaccine#:~:text=%E2%80%9CBy%20refusing%20to%20share%20their,benefiting%20from%20huge%20public%20subsidy. Accessed 22 May 2023. Randall, Tom, et al. “More than 12.7 Billion Shots given: Bloomberg Covid-19 Vaccine Tracker.” Bloomberg.Com, 5 Oct. 2022, www.bloomberg.com/graphics/covid-vaccine-tracker-global-distribution/. Jenny Lei Ravelo. “Global Vaccine Market ‘Dealing with Oligopolies,’ WHO Says.” Devex, Devex, 9 Nov. 2022, www.devex.com/news/global-vaccine-market-dealing-with-oligopolies-who-says-104397. Accessed 22 May 2023. ‌ “‘The Whole Nation Together against COVID-19’ Awareness Campaign Launched Jointly by the Government of Mauritius, United Nations and World Health Organization.” OMS | Bureau Régional Pour L’Afrique, Mar. 2021, www.afro.who.int/fr/node/14624. Accessed 22 May 2023. ‌‌Purwar, Rati, and Suchit. Consequences and Solutions to Goods and Services with External Benefits Being Underprovided. Interview by Ramita Diwan, 19 May 2023. Suchit. What Are the Consequences and Solutions Implemented by the Government When COVID Vaccines Were Being Under-Provided. Interview by Ramita Diwan, 12 May 2023. Diwan, Amit. What Is a Monopoly and a Market Failure? Interview by Ramita Diwan, 15 May 2023. Titley, Brian, and Dan Moynihan. Complete Economics for Cambridge IGCSE and O Level. 3rd ed., Oxford University Press, 2018, pp. 90–95, chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/innoventureseducation-my.sharepoint.com/personal/dia11240_diaestudents_com/Documents/Attachments/Economics%20for%20Cambridge%20IGCSE%C2%AE%20%26%20O%20Level.pdf. Accessed 8 May 2023.