Market Imperfections

An important obstacle to economic development is market imperfection. They relate to immobility of factors, price rigidity, ignorance of market conditions, rigid social structure and lack of specialisation. These factors can act as frictions and impediments in the achievement of an optimum allocation of resources. Due to these market imperfections, the efficiency of production in the economy becomes very low and the country's natural resources may remain utilized or underutilized, the employment will get misdirected. The labour cant move freely in search of higher rewards but remain where they are, though their marginal productivity is even. Capital will not be utilized for remunerative purposes.