A Level Economics AQA Practice Exam

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What does a missing market indicate?

An overabundance of goods in the market
The lack of a market for certain goods
A surplus of public goods
Effective pricing strategies

The correct answer is: The lack of a market for certain goods

A missing market indicates the lack of a market for certain goods. This typically occurs when there is no voluntary exchange taking place between buyers and sellers for specific products or services. Various factors can contribute to a missing market, such as government regulations, insufficient demand for the good, or instances where the good is a public good, leading to challenges in pricing and exclusion. In economic theory, the concept of missing markets is crucial because it highlights areas where economic efficiency is not achieved. For instance, if certain goods are deemed essential but are not being traded, it suggests that there might be unmet needs or inefficiencies present in the market structure. Recognizing a missing market can help economists and policymakers identify opportunities for intervention to foster trade and enhance welfare by creating incentives for the production and exchange of these goods.