Merit And Demerit Goods 4.1.8.5

Question 1

What are merit goods, and an example

Answer 1

‘Good’goods, if left to the free market there would be underconsumption
Healthcare, education, vaccination schemes

Question 2

Why does underconsumption of merit goods occur

Answer 2

Positive externalities in consumption
People only consider the private benefits of consumption, if they appreciated the full social benefits they would consumer more

Question 3

What does information failure lead to

Answer 3

Underconsumption

Question 4

What are demerit goods

Answer 4

‘Bad goods’
If left to the free- market, there would be overconsumption

Question 5

Example of demerit goods

Answer 5

Alcohol, cigarettes

Question 6

Why does overconsumption of demerit goods occur?

Answer 6

Negative externalities in consumption
People only consider the private benefits of consumption of they appreciated the full social benefits they would consume less

Question 7

Are all products that result in positive/ negative externalities merit or demerit goods?

Answer 7

No
May be positive externalities form enjoying a view but that isn’t a merit good

Question 8

Are merit goods and public goods the same?, why

Answer 8

No, merit goods can be provided privately and through public provision
Merit goods have the characteristics of private goods ( rivalry and excludability)