Government failure occurs when government intervention in the economy leads to a misallocation of resources
Government failure happens when a government tries to fix an economic problem but makes resource allocation worse instead. The intervention causes more harm than it prevents.
Real World
The UK's post-2012 Help to Buy scheme subsidised house purchases to improve affordability, but economists argued it primarily boosted demand without increasing supply — pushing prices higher and worsening the original housing affordability problem.
Exam Focus
Always explain the mechanism of failure (e.g. unintended consequences, information gaps) not just that the policy 'didn't work' — mechanism = marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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