2.9 INFORMATION FAILURE Flashcards
what is information failure
occurs when ‘economic agents’ have inaccurate, incomplete, uncertain or misunderstood data and so make potentially ‘wrong’ choices.
what can information failure result in
over/under consumption and/or production of goods and services
where does information failure occur
in the market of merit, demerit and public goods
whats a merit good
product or service that is deemed beneficial to society (eg.education, health)
when does information failure occur in merit goods
when a good can be provided by the market but consumers may not be able to afford or don’t feel the need to purchase
when does partial market failure occur in merit goods
when the market won’t provide the good in quantities society needs
what does consumption of merit goods lead to
positive externalities where MSB > MPB
examples of merit goods
education, health and sport centres
whats a de merit goods
a product or service that is considered harmful or undesirable to individuals and society
what does consumption of demerit goods lead to
negative externalities
what are examples of demerit goods
alcohol, drugs and gambling
