Merit goods

Question 1

Merit good definition

Answer 1

The social benefits of consumption exceed the private benefits.

Question 2

Market provision of merit goods

Answer 2

• Markets can and do provide merit goods such as healthcare and education (but arguably they under-provide.)
• Merit / demerit goods lead to partial market failure

Question 3

Positive externalities

Examples: Education and Healthcare

Answer 3

• A merit goods is a good / service for which the social benefits of consumption enjoyed by the whole community exceed the private benefits received by the consumer.
• Consumption by an individual produces positive externalities that benefit the wider community.
• Education: the community benefits from an education population
• Healthcare: fewer people catch diseases in a community.