Types Of Goods

Question 1

Define public goods

Answer 1

Product that one individual can consume without reducing its availability to another individual

Question 2

Define private goods

Answer 2

Benefits accrue to the individual and others are prevented from consuming it

Question 3

Define merit goods

Answer 3

Goods that bring more benefit to the individual than they realise

Question 4

How is merit good consumption encouraged

Answer 4

Arise due to information failure
MPB = D, level of demand that exists —> based on the consumers perception of private benefits
MSB —> benefit to society is greater than the perceived MPB as it reflects true benefits individuals receive from the consumption of merit goods

Question 5

Define demerit goods

Answer 5

Goods whose consumption will cost/harm the individual more than they realise

Question 6

How are demerit goods consumption discouraged

Answer 6

Arise due to information failure
Consumers overvalue the private benefits of the consumption of the good
MPB = D, level of demand existing in the market —> based on consumers perception of their private benefit
MSB, benefit to society is less than the perceived MPB —> reflects true benefits individuals receive from consumption of demerit goods

Question 7

What are characteristics of a public good

Answer 7

Non excludable

Non rivalrous

Question 8

What are characteristics of a private good

Answer 8

Excludable and rivalrous

Question 9

What are quasi public goods, give an example

Answer 9

Public goods with characteristics of private goods

E.g. NHS —> provided by public sector but not a public good as resources are limited (waiting lists)