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Market Failure and Government Intervention

                                Figure 17-5  Lorenz Curve

NOTE:  The cumulative percentage of GNP (column 5 in Table 17-3) is diagrammed on the y-axis against the percentage of the population in each quintile (column 2 of Table 17-3) along the x-axis.

F.  Dynamic Market Failure

Markets may be structured in such a way that they become dynamically unstable when left to themselves.  The instability appears when there is a sudden shock to a market from an outside event.  If the market returns to its original equilibrium it is stable.  There are two ways to return to equilibrium as pictured in Figure 17-6a.

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