market distortion

Market distortion occurs when external factors, such as government policies, regulations, or subsidies, disrupt the natural balance of supply and demand. These interventions can influence prices, availability, or competition, leading to outcomes that differ from what a free market would produce. For example, a subsidy might artificially lower prices for a product, encouraging excessive consumption or production, which can misallocate resources and reduce overall economic efficiency. Essentially, market distortion interferes with the natural flow of economic activities, potentially causing inefficiencies and unintended consequences.