merit & demerit goods Flashcards
Q: What is a merit good?
A: A merit good is a good that provides benefits to individuals and society but is often under-consumed if left to the free market, like education or healthcare.
Q: What is a demerit good?
A: A demerit good is a good that has negative effects on individuals and society, leading to over-consumption if left to the free market, like tobacco or alcohol.
Q: Why are merit goods often under-consumed?
A: Merit goods are under-consumed because individuals may not be fully aware of their long-term benefits, or they may not be affordable to everyone without government support.
Q: Why are demerit goods often over-consumed?
A: Demerit goods are over-consumed because individuals may not consider the negative effects on health or society, or they may underestimate the long-term consequences.
Q: How do governments encourage the consumption of merit goods?
A: Governments can encourage merit goods by providing subsidies, making them free, or educating the public on their benefits.
Q: How do governments discourage the consumption of demerit goods?
A: Governments discourage demerit goods by imposing taxes, restrictions, or raising awareness about their harmful effects.
Q: Give two examples of merit goods.
A: Education and vaccination are examples of merit goods, as they provide benefits that go beyond the individual.
Q: Give two examples of demerit goods.
A: Tobacco and alcohol are examples of demerit goods, as their consumption can lead to health issues and societal costs.
Q: What is the main economic issue with merit goods?
A: The main issue is under-consumption, where society would benefit if more people consumed these goods.
Q: What is the main economic issue with demerit goods?
A: The main issue is over-consumption, where individual choices can lead to harm or costs that affect society as a whole.
