3.5 Merit and Demerit goods Flashcards
What are merit goods?
goods and services the government feels that people will underconsume and which might be subsidised or provided free at point of use
Who provides merit goods?
government and private sector
Why are merit goods underconsumed ?
the consumers dont fully understand the private benefit of their consumption.
there is IMPERFECT INFORMATION or INFORMATION FAILURE
WHat is societys view on merit goods?
- they value and judge that everyone should have them regardless of whether an individual wants them
Examples of merit goods?
- healthcare
- education
- bike schemes
- museams + galleries
- nutritional advice
- libraries
Why is education viewed as merit good?
- may increase skills and productivity of workers leading to lower unit costs. lead to lower unemployment
Why can extra education viewed as a not a merid good?
- effectiveness of extra education spending has been questiones
- money may be better spent targeting certain groups or ages in society
What are the seven solutions to reduce underconsumption of merit goods?
- subsidise
- regulate
- max price
- provide financial incentives
- gov should provide it
- more info
- leave to free market
Give examples of when a subsidy could be used for merit good?
- nurseries
- sports clubs
Give exmaples of when regulation could be used for merit goods?
- education to a certain age
- seat belts
Give examples of when a max price has been used for merit goods?
energy cap or rent control
Give exmaples of when a financial incentive has been used for merit goods?
- payed to stop smoking when pregnant or to loose weight
- getting rid of old cars
- no or little tax
GIve exmaples of when the gov has provided a merit good?
- school meals
- education
- healthcare
what are de merit goods?
goods that are believed to be bad for you and consumption can lead to negative externalities
Explain the costs of demerit goods?
social cost of consumption is higher then private costs
