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Environmental market failure

Environmental issues have been a major topic in the news in recent times, with concern about climate change and the pollution caused by plastic in the oceans. In this column, Steve Stoddard offers guidance on answering exam questions concerning environmental market failure

As the world’s population grows and globalisation continues apace, concern has increased about the impact of human activity on the world around us, particularly in relation to pollution, resource depletion and climate change. Economists warn of challenges to long-term sustainability from the overexploitation of the Earth’s scarce resources. While the sustainability of economic growth is largely covered as a macroeconomic concept, environmental market failure is an increasingly popular issue covered in microeconomics.

The first part of an A-level essay question on this topic might ask you to explain the concept of environmental market failure, while the second part could ask whether there is a ‘best’ solution to the problem.

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