There are flaws in the market, both in demand and in supply; This happens because the

demand curve does not reflect the total willingness of consumers to pay for the desired
good and the offer does not reflect the total cost of producing the goods and services.
These failures are known as externalities, which can be negative or positive. The
positive externalities happen when the benefited consumers are third parties and
indirectly receive the utility, this can generate a underproduction of the goods. The
negative externality is that in which the producers do not pay the total cost of
production of the goods, for example a city that pays the consequences of the
contamination of a factory, the owners of the factory do not assume this cost, this
generates a overproduction of goods.
The consumer surplus is the difference between the price that the consumer is willing to
pay (a higher price) less the price that actually pays (lower price). The producer surplus
is the difference between the price actually received (higher price) minus the minimum
price that this producer establishes (lower price).
Private goods have two characteristics: Rivalry and Exclubility. Rivalry means that if a
person buys a product another person can not buy the same good or enjoy the utility of
the good. The exclubility means that to enjoy a good is necessary to pay a price, those
who can not afford it can not enjoy it. Public goods do not have these characteristics, for
example fireworks are enjoyed by many people without a payment and can be enjoyed
by many people at the same time.
Adverse selection happens when a person makes an unfavorable decision because they
do not have all the information necessary to make the decision, for example when a
person buys a used car, and the seller is not sincere in the description of the state of the
car. Moral hazard is what people have because they feel safe in their decisions because
if something happens wrong, the consequences are assumed by third parties, for
example when a person buys insurance against theft.