merit and demerit goods

Question 1

what are merit goods

Answer 1

goods that have positive externality this party effects, they make and additional contribution to society example a degree which benefits individual and society bc of good teaching

Question 2

what are demerit goods

Answer 2

Goods or services that have negative externalities, external/ extra spill over effect, negative third party effects

eg cigarettes -

Question 3

what are positive externalities

Answer 3

goods and services with beneficial/ positive spill over effects. products with positive externalities ( merit goods) are under consumed

Question 4

what are negative externalities

Answer 4

products with negative spill over effects. Demerit goods have these and are over consumed

Question 5

how can government increase/ decrease production of merit and demerit goods

Answer 5

merit goods- subsidies, information

demerit goods - ban, tax

Question 6

what do labels on externalities stand for and mean

Answer 6

• MPC- marginal private cost ( not taking into account 3rd party effects if any)
  MSC- marginal social cost
  MSB- marginal social benefit
  MPB- marginal private benefit

on externality graph still have price level and quantity/ output

Question 7

problems with merit goods why may they be under consumed ?

Answer 7

free rider problem-