During January and February 2014, pressure mounted on the UK Government to construct more flood defences. Flooding damaged homes, factories and other resources, and some were destroyed. It was argued that state intervention was necessary in this situation because there was evidence of market failure.
(a)[2]
Define the term ‘market failure’.
(b)[4]
Explain how government regulation can reduce market failure.
(c)[6]
Analyse how a decrease in resources affects government economic aims.
(d)[8]
Discuss whether the social benefits from building flood defences will be greater than the social costs involved.
Worked solution & mark scheme
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