Edexcel IAL · WEC11, WEC12, WEC13, WEC14

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1.3.5 — Market Failure
🔑 Key idea
Markets fail when prices give people the wrong signals — causing too much or too little to be produced relative to what's best for society.
Negative externality — cost imposed on third parties not in the transaction; causes overproduction.
Private cost < social cost → market price is too low → output above social optimum.
Deadweight welfare loss — market produces beyond MSC = MSB; total welfare is reduced.
Factory ignores pollution cost
P < Social Cost
Overproduction
Welfare loss
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About Edexcel IAL Economics

Edexcel International A-Level (IAL) Economics is one of the most popular qualifications for students at international schools worldwide. Offered by Pearson Edexcel, the IAL Economics specification covers the full range of economic theory across four units: Unit 1 Markets in Action (WEC11) introduces microeconomic fundamentals including supply, demand, elasticity, market failure and government intervention. Unit 2 Macroeconomic Performance and Policy (WEC12) covers aggregate demand and supply, national income, economic growth and macroeconomic policy tools.

At A2 level, Unit 3 Business Behaviour (WEC13) examines the theory of the firm, market structures from perfect competition to monopoly, labour markets and competition policy. Unit 4 Developments in the Global Economy (WEC14) explores globalisation, international trade, exchange rates, poverty and inequality, and development economics.

Revvy Learn provides free revision notes for every spec point across all four IAL Economics units. Unlike generic revision sites, our content is specifically built for the Edexcel IAL specification and is used by students in South Korea, Hong Kong, Malaysia, Singapore, Pakistan, Sri Lanka and across the Middle East. Each topic includes structured notes, diagrams, adaptive flashcards with spaced repetition, exam-style practice questions with model answers, and an AI tutor that helps you build evaluation chains for 20-mark essays.

IAL Economics exams are available in both the January and June exam series, giving international students flexibility in when they sit each unit. Whether you are preparing for the January or June session, Revvy Learn covers the complete specification to help you achieve the highest grades.