Information Provision

Question 1

Def

Answer 1

Government provide information through education or by advertising the benefit or harmful effect of a good

Question 2

Demerit

Answer 2

Giving info. Enables to understand the harm done. Changing taste and pref. Consumer less incentive. Demand curve d1 to d2. Lowers the equilbrium price p1 to p2. Contraction of supply q1 to q2
Social optimum
Correcting oversumption

Question 3

Merit good

Answer 3

Giving info. Understand the benefit changes taste and preferences.
More incentive shifting demand to the right d1 to d2.
Increase equlilbrium price p1 to p2
Extention of supply q1 to q2
Correcting underconsumption