Market inefficiencies are critical because they can lead to suboptimal outcomes, such as:
- Misallocation of Resources: Capital and labor may not flow to their most productive uses, reducing overall economic efficiency. - Economic Inequality: Inefficiencies can exacerbate wealth disparities if certain groups are better able to exploit them. - Reduced Innovation: In a monopolistic or oligopolistic market, there is less incentive for firms to innovate, potentially stalling technological progress.