Market failure in the provision of goods and services refers to a situation where the market mechanism fails to provide Goods and services in sufficient quantities. As a result, the government feels they need to intervene and provide merit goods and services and public goods and services, as they are often under produced. The government also attempts to stop the production of de-merit goods and services as they are over produced. Some people argue that the government should not intervene in the production of goods, as the market is a true indicator of what should and should not be produced.
A merit good is a good that the government believes is very important to society but is under consumed if provided by the market mechanism. This is because individuals often consider how the good benefits them as individuals rather than the benefits that consumption gives society or, more simply, people may not be able to afford, or feel the need to purchase them.
A good example is art galleries, individuals don't set them up as they are non-profitable, they are very expensive and most people are not interested in art. As the government believes these goods are important to society they may choose to encourage greater production or consumption of a merit good through regulation, subsidies or they may even produce the good themselves. Goods typically considered to be merit goods include education and preventive health-care like vaccinations. The market could provide these goods but many people would not be able to afford them and hence, their children would not go to school or get vaccinated. Since the government does not want this to happen they step in and provide merit goods at very little costs.
Apart from making merit goods and services more available, the government also attempts...