3.1.5.5 Merit and demerit goods Flashcards Preview

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Flashcards in 3.1.5.5 Merit and demerit goods Deck (6)
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1

What is a demerit goods?

A good, in which the cost of consuming it and negative externalities of consumption, are ignored or under-estimated (imperfect information).

2

What is a demerit goods?

A good, in which the benefits of consuming it and positive externalities of consumption, aren't known or under-estimated (imperfect information).

3

Give an example of merit good?

Students may under-estimate the benefits of studying, thus leave school early.

4

Give an example of demerit good?

People may not be aware of the dangers of smoking.

5

In free markets, merit goods are?

Under-consumed

6

In free markets, demerit goods are?

Over-consumed