Until now we all have seen how market acts as an invisible hand to maintain balance between suppliers and buyers when competition exists. We say that this type of market drives us to Pareto optimality where no one will be made better off without making the others worse off. This is a concept that will be discussed further in details. In general, where competition prevails, I believe that market works, that is, it takes us to Pareto optimality. However, when the pursuit of private interest does not lead to an efficient distribution of society’s resources; situations where individual behaviour does not lead to Pareto efficiency, it is said that the market has “failed”. Therefore, in this paper, I am going to identify the four major sources of market failure