Market Failure and the Role of Government

Simply put, the Gini coefficient is a statistical measure used to calculate inequality within a nation. Originally thought of by Corrado Gini in 1912, it is most commonly used to measure income inequality.

A public good is a good whereby no individual can be excluded from benefiting from it. In other words, everyone can benefit from its use.

In economics, an externality refers to a cost or benefit that is imposed onto a third party. These can come in the form of ‘positive externalities’ — that create a benefit to a third party. Or, ‘negative externalities’ — that create a cost to a third party.

A market failure is said to occur when there is an inefficient allocation of resources. This can occur when the supply does not fully reflect demand. So there might be an undersupply or oversupply.