Contents Section 1 2 1.1 Market Failure 2 1.2 Public goods 2 1.2.1 Relation between Market failure and Public goods 2 1.3 Merit goods 2 1.3.1 Relation between Merit goods and Market Failure 2 1.4 Externalities 2 1.5 Imperfect competition 3 Section 2 4 2.1 UK government policy on the environment 4 2.2 About the policy 5 2.2.1 Water quality 5 2.3 Instruments the government use to achieve their policy 5 2.4 A justified evaluation of the performance of the policy in relation to its use within the UK 6 References 7

Section 1
1.1 Market Failure Market Failure is an economic situation where free market fails to allocate resources efficiently. It is the abbreviated situation in the any market where the curves of the quantities of the product demand and the quantities of the product supply do not match any equilibrium. This situation is called market failure. In addition, people are selfish that they produce goods and service in a business field, so it becomes market failure. The government have to intervene following reference namely public goods, merit goods, extremities and imperfect competition for improving market.
1.2 Public goods Public goods are about goods or services that can be consumed by everybody in a society, or may not produce at all. Public goods are non-excludable which stand for no one individual cannot be ineffectively kept out from using goods. Most of the public goods are served by government. (E.g. Street lightning).
1.2.1 Relation between Market failure and Public goods For an example of public goods is the street lighting. It is a public good because the street lightings are used by everybody in a society but there are no markets for the street lightings. In this case, the government have to support which public goods for getting better market.
1.3 Merit goods Merit goods are those goods and services