Question

Why do market failures exist in developing economies? Use Fiji as an example

Answer 1

The markets in a developing country are sick of following shot-comings which let them to face failure under different conditions:

a) Free allocation of resources: The firms are not allowed to allocate their resources in the market.

b) Monopoly effect : Most of the market in the developing countries are under the trap of monopoly power.

c)Lack of infrastructure: The developing economies are suffering of basic infrastructure like defense, street lights, highways, information system, etc..

d) Half framed markets : The markets in the developing countries are not organized and lacking merit products like education and Medicare/Healthcare.

e)Non-acceptance : The external firms are not accepted by the local sellers and their avoid them.

f)Right on Infusible assets: The government of the developing countries would not allow outsiders manufacturers and traders to get the properties register in their names .

g) Information failure: Marketers in the developing countries do not provide complete information regarding resources allocation, prevailing prices, quality required by customers, etc. to each others.

h) Credit missing: The traders and firms would not find appropriate credits to fund their operations in the developing countries markets.

The market failure in Fiji has been due to :

1) price control by government and ensuring that goods and services are to be sold at fair price.

2) innovators has to face a stiff competition with rigid customers and competitors.

3) the new comers do not get correct information for the market and allocation of resources.

4) certain products like natural gas, electricity and phone services are been ensured to be sold at lower cost, creating a natural monopoly, due to government’s effort to prevent citizen exploitation.

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