Y1 25 Merit and Demerit goods

Question 1

What is a merit good?

Answer 1

Good deemed more beneficial to consumers than they realise due to imperfect information (normative) , information failure creates positive externality, under-consumed and underproduced as consumer behaviour irrational

Question 2

Merit good examples

Answer 2

Exercise, education, healthy eating, healthcare

Question 3

What is a demerit good?

Answer 3

Good deemed more harmful to consumers than they realise (normative), asymmetric/info failure creates negative externality, overconsumption and overproduction

Question 4

Demerit good examples

Answer 4

Cigarettes, alcohol, gambling, junk food, recreational drugs