Merit goods and demerit goods
The secret to scoring awesome grades in economics is to have corresponding awesome notes.
A common pitfall for students is to lose themselves in a sea of notes: personal notes, teacher notes, online notes textbooks, etc... This happens when one has too many sources to revise from! Why not solve this problem by having one reliable source of notes? This is where we can help.
What makes TooLazyToStudy notes different?
are clear and concise and relevant
is set in an engaging template to facilitate memorisation
cover all the important topics in the O level, AS level and A level syllabus
are editable, feel free to make additions or to rephrase sentences in your own words!
Looking for live explanations of these notes? Enrol now for FREE tuition!
The market may fail to provide the correct amount of merit goods and demerit goods.
The free market may not be able to allocate resources efficiently due to information failure.
A merit good is defined as a good that is better for a person than the person who may consume the good realises.
Due to information failure, merit goods tend to be
For a merit good such as healthcare, the long-term private benefit of consumption exceeds the short-term private benefit of consumption. But when deciding how much to consume, individuals take account of short-term costs and benefits, ignoring or undervaluing the long-term private costs and benefits.
Demerit goods are those products that are worse for the individual consumer than the individual realises.
Due to information failure, demerit goods tend to be
For example, when a person makes a decision to smoke, he is not fully in possession of all of the information concerning the harmful effects of smoking.