merit and demerit goods

Question 1

merit goods- definition, why they occur, what they are, examples and what happens

Answer 1

-goods that are deemed more beneficial to consumers than they might realise
-occurs due to imperfect information: info failure (not clear, ignored). or asymmetric info (not passed on to consumers)
-they are positive externalities in consumption
-examples include: healthcare, education, exercise
-they are under-consumed/produced
-positive externality in consumption curve

Question 2

demerit goods-definition, why they occur, what they are, examples and what happens

Answer 2

-goods deemed more harmful to consumers than they might realise
-due to imperfect information: info failure and asymmetric info
-they are negative externalities in consumption
-examples include: alcohol, gambling smoking
-they are often over-consumed/produced
-draw negative externality diagram