Merit/De-Merit

Question 1

What are Merit goods

Answer 1

Goods with a postive effect/ more benefical than consumers realise

They are: under produced and consumed

Question 2

Why may merit goods more benefical than consumers

Answer 2

Information failure-

Asymmetric info

Question 3

An under consumed good is a ……

Answer 3

Merit good(social benefit>Private benefit)

Question 4

What do merit goods give off

Answer 4

Positive externalties

Question 5

Consumption of a de-merit good can lead to what?

Answer 5

Negative externalties

Question 6

2 reasons Why consumers may not realise the benefits of a merit good?
(Why are they underconsumed/produced)

Answer 6

1)Information failure-consumers/firms having inaccurate or a lack of info
Which may cause them to make wrong choices

2)Asymmetric info- one party(consumers or seller) knows more info then the other

Question 7

Why may consumers be unaware of the negative externalities of De-merit

Answer 7

Due to Imperfect information- both consumers producers may lack knowledge as theres little information available

E.G in 1920s with the effect of smoking