A missing market occurs when there is demand for a product or service but no supply available. It can be caused by simple shifts in demand, timing effects, complex economic factors, lack of coordination, political or legal systems, lack of technology, or information. It represents an out-of-balance market that may correct itself over time.
In microeconomics, a missing market is an example of a failure within the economic market. Missing market means that there is a demand for a good or service, but there is no supply available for this sought-after product. It may involve a temporary shortage or it may refer to a product that is simply not available everywhere at all times. A missing market can be created by something as simple as a severe storm or drought, or it can be attributed to much more complex economic factors.
Microeconomic equilibrium occurs when the demand for goods equals the supply. A missing market, therefore, is a sign that the market is out of balance. More often than not, an out-of-balance market will correct itself until demand meets supply again. For example, if people started requesting yellow balloons, entrepreneurs would see the profit potential in the balllon market and start new factories producing balloons. In the case of a missing market, however, suppliers are unable to produce a specific good or service for a variety of reasons.
In many cases, this phenomenon is caused by simple shifts in demand or by timing effects on the market. If suppliers are heavily focused on creating yellow balloons and customers suddenly develop a desire for red balloons, companies may take some time to find the right red dye and shift production to this new product. This temporary lag in the market represents a missing market. The same type of shortage could also occur in the coffee market if a severe drought were to occur in the coffee growing regions. Demand would exceed supply and customers would temporarily be unable to obtain coffee until the drought was resolved.
In other cases, missing markets can be attributed to much more complex factors. An example is the electric car. Customers may want to buy these cars, but are reluctant to do so due to a lack of information about their long-term performance, as well as the availability of charging stations. Suppliers, on the other hand, are reluctant to produce these cars because customers are still unsure of the future of these vehicles. This lack of coordination and communication has created a missing market in the automotive industry.
Sometimes missing markets are simply due to political or legal systems. For example, some consumers want to buy illegal products such as child pornography. Due to strict legal standards and personal morals, most suppliers refuse to produce this good, leading to a missing market. A missing market can also be caused by a lack of technology to produce a good or a lack of information. For example, people affected by air and water pollution could apply for the remediation service for this pollution. In this example, there is a missing market due to the difficulty of identifying who is responsible for the pollution.
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