Merit Goods, Public Goods, Demerit Goods Flashcards
merit goods
those that create positive spillover benefits
Are merit goods under or over produced by the free market?
under
What is the degree of government provision or encouragement of a merit good related to?
directly to amount of spillover benefits provided by good
public goods
non-excludable and non-rivalrous
examples of public goods
steetlights, prisons, roads
non-rivalrous
if one person’s consumption does not prevent others from enjoying it
non-excludable
if the producer cannot prevent particular individuals from enjoying its benefits e.g. streetlights
What must a good be to be public?
non-rivalrous and non-excludable
demerit goods
those that create negative spillover costs to third parties
Are demerit goods over or underproduced?
over because negative effect on society e.g. cigarettes
private goods
must be purchased in order to be consumed, and consumption by one individual prevents another individual from consuming it
common goods
rivalrous and non-excludable
tragedy of the commons
dilemma posed when common resources are used rapidly by private individuals who enjoy short-term benefit without understanding long-term depletion
collective goods
non-rivalrous and excludable
private good examples
clothing, electronics
