Market failure refers to a situation where the allocation of goods and services in a market economy is inefficient and fails to maximize societal welfare. It occurs when market forces of supply and demand do not lead to an optimal allocation of resources. Market failures can arise due to various reasons, including externalities, public goods, information asymmetry, market power, and natural monopolies. Externalities occur when the production or consumption of a good affects third parties who are not involved in the market transaction. Public goods, such as national defense or environmental protection, are undersupplied by the market due to the free-rider problem and non-excludability. Information asymmetry occurs when one party in a transaction has more information than the other, leading to suboptimal outcomes. Market power arises when a single seller or a few sellers have significant control over the market, resulting in higher prices and reduced competition. Natural monopolies occur when economies of scale make it more efficient for a single firm to provide a good or service. Market failures can have detrimental effects on efficiency, equity, and overall welfare. Understanding market failure helps in identifying areas where government intervention or policy measures may be necessary to correct the inefficiencies and improve societal outcomes.