nonrival; nonexcludable; underprovided.
Explanation:
In a perfect competition, there are many buyers and sellers of homogeneous products, and there is free entry and exit in the market.
This simply means that, in a perfectly competitive market, there are many buyers and sellers (price takers) of homogeneous products (standardized products with substitute) and the market is free (practically open) to all individuals or business entities that are willing to trade all their goods and services.
Generally, a perfectly competitive market is characterized by the following features;
1. Perfect information.
2. No barriers, it is typically free.
3. Equilibrium price and quantity.
4. Many buyers and sellers.
5. Homogeneous products.
A substitute product can be defined as a product that a consumer sees as an alternative to another product and as such would offer similar benefits or satisfaction to the consumer.
For substitute products (goods), the cross-price elasticity of demand is always positive because the demand of a product increases when the price of its close substitute (alternative) increases.
A nonexcludable good simply means that it's near impossible for a user to effectively exclude others from using the good. Thus, each and every individual have access and can use the goods.
Basically, all public goods such as streetlights are nonrival and nonexcludable goods.
Similarly, nonrival goods refer to goods that can be accessed, processed and consumed (used) by multiple consumers at a specific period of time.
Additionally, any good that is nonrival and nonexcludable is said to be a public good.
In this scenario, most neighborhood streets are illuminated at night by streetlights. The streetlights are nonrival and nonexcludable. Therefore, they are likely to be underprovided by the competitive market and this is generally considered to be a market failure.
Hence, a market failure arises when there is inefficiency in the distribution or allocation of goods and services in a free market.
This ultimately implies that, the demand of the consumer of these goods and services are not being met with the level of supply (output) required i.e the forces of demand and supply are not efficient in producing the level of output required by the economy. Some of the causes of market failure are imperfect information, monopoly, oligopoly, externalities, etc.
