Merit & Demerit Goods (AS/A LEVELS/IB/IAL)

Merit & Demerit Goods (AS/A LEVELS/IB/IAL)

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Merit Goods

Merit goods provide a benefit to individuals and society. They provide positive externalities through consumption or production of goods and services.

Unfortunately not everyone is aware of the benefits of merit goods. This has caused under-consumption of these goods in society.

Examples of merit goods include health and education

Demerit Goods

Demerit goods are damaging to individuals and society. They provide a negative externality through consumption and production.

Due to asymmetric information individuals are sometimes unaware of the negative impacts caused by demerit goods.

E.g. Alcohol, Cigarettes, Illegal drugs

Tushar Depala

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