Market Failure and Government Intervention
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.