Market Failure & the Environment

Environmental consequences of business behaviour often result in market failure as they cause more social costs than social benefits

Social costs or negative externalities caused by production of goods include pollution of air and water, the destruction of countryside areas and noise pollution

Because markets do not consider environmental factors they often supply more of a product at lower prices

This can result in increased destruction of the environment

The environment is able to absorb a certain level of pollution however if more pollution is created it results in negative externalities