Merit and Demerit goods

Description

A level Economics Flashcards on Merit and Demerit goods, created by Matthew Battell on 08/11/2021.
Matthew Battell
Flashcards by Matthew Battell, updated more than 1 year ago
Matthew Battell
Created by Matthew Battell almost 3 years ago
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Question Answer
Merit Goods A merit good is a good in which consumption results in positive externalities onto a third party. There are two characteristics of a merit good - People do not realise the true benefit (underestimating benefits of education) -These goods have positive externalities Therefore in a free market these goods are underconsumed. Examples Healthcare Museums Fruit and Veg Education
Merit goods diagram
Demerit goods A demerit good is a good in which consumption results on negative externalities on a third party . A demerit good has two characteristics - A good which harms the consumer E.g Cigarettes, drugs -Usually these goods have negative externalities e.g smoking creates passive smoking Therefore in a free market these goods will be overconsumed Examples Smoking Drinking Taking drugs Drinking sugary softdrinks
Demerit goods diagram
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