460643
Merit and Demerit Goods
- MERIT GOOD= a good that would be
under-consumed in a free market, as individuals do not
fully perceive the benefits obtained from consumption
- they ought to be subsidised or provided free according to the government
- Examples~ health
services, education,
public libraries,
inoculations for
children and students
- can be provided by the private sector and the public sector
- e.g. we have an independent education system and
people can buy private healthcare insurance
- e.g. we have an independent education system and
people can buy private healthcare insurance
- they ought to be subsidised or provided free according to the government
- DEMERIT GOOD= a good that would be
over-consumed in a free market, as it brings less
overall benefit to consumers than they realise
- goods considered 'bad for you'
- Examples~ alcohol,
cigarettes, drugs,
social effects of
gambling addiction
- consumers may be unaware of
dangers and potential long-term
damage in their own health
- goods considered 'bad for you'
- FAILURE OF INFORMATION (OR INFORMATION
FAILURE)= where economic agents do not properly
perceive the benefits or disadvantages of a transaction
- Causes of under-consumption of merit goods
and over-consumption of demerit goods
- Causes of under-consumption of merit goods
and over-consumption of demerit goods
- PARTIAL MARKET FAILURE=
where the free market provides
a product but with a
misallocation of resources
- Problems caused
by merit and
demerit goods
- Both merit and
demerit goods are
considered market
failures since their
existence will
cause the wrong
amount of the
goods and services
concerned to be
produced
- there will be insufficient demand for merit goods
- There will be too much demand for demerit goods
- there will be insufficient demand for merit goods
- Both merit and
demerit goods are
considered market
failures since their
existence will
cause the wrong
amount of the
goods and services
concerned to be
produced
Anexos de mídia
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