2.8.2 - Merit and Demerit Goods Flashcards
1
Q
Why are merit goods a market failure
A
They tend to be under consumed in free markets as their benefits are not accounted for in the free market allocation of resources
2
Q
Define merit goods
A
Goods that society deems people should consume because they are associated with significant social benefits
3
Q
Define demerit goods
A
Goods that society says people should not consume because their consumption is associated with significant social costs
4
Q
Why are demerit goods a market failure
A
They tend to be over consumed due to their benefits being over valued
