3.8.5 Merit and demerit goods

• Merit goods are goods and services that are deemed to be socially desirable and beneficial, but may be under-consumed
• Demerit goods are socially beneficial but over-consumed due to self-control.

  False
• Merit goods are always free in the market economy.

  False
• Merit goods are over-consumed by individuals due to lack of information.

  False
• What are demerit goods deemed to be socially?

  Undesirable and harmful
• Merit goods are considered socially beneficial
• Match the examples with their corresponding category:

  Education ↔️ Merit good

  Alcohol ↔️ Demerit good
• What is the primary difference between merit goods and demerit goods?

  Socially beneficial vs undesirable
• What is the consumption pattern of merit goods compared to demerit goods?

  Under-consumed vs over-consumed
• Why do governments intervene in the market for merit goods?

  To increase consumption
• What is the term for the situation when merit goods are under-consumed due to lack of information?

  Market failure
• Excise taxes and advertising restrictions are used to reduce the over-consumption of demerit goods.
• What is a demerit good?

  Socially undesirable, over-consumed
• Governments often use excise taxes to address the over-consumption of demerit goods.

  True
• What are two common examples of demerit goods?

  Alcohol and tobacco
• Why are merit goods under-consumed by individuals?

  Lack of information
• Match the type of good with its consumption level:

  Merit Goods ↔️ Under-consumed

  Demerit Goods ↔️ Over-consumed
• Match the type of good with its characteristic:

  Merit Goods ↔️ Socially beneficial

  Demerit Goods ↔️ Socially undesirable
• Governments use subsidies to increase the consumption of merit goods.

  True
• What is an example of a demerit good mentioned in the text?

  Gambling
• Demerit goods are over-consumed due to lack of information
• Governments intervene to correct market failures in merit and demerit goods.


  True
• Governments use policies like subsidies to increase the consumption of merit goods
• What is a key characteristic of merit goods?

  Socially beneficial
• Demerit goods lead to a market failure due to their socially undesirable and harmful
• Match the government policy with its purpose for demerit goods:

  Excise Taxes ↔️ Increase prices to discourage consumption

  Advertising Restrictions ↔️ Reduce marketing appeal

  Public Education Campaigns ↔️ Inform about harmful effects
• One government policy to address market failure in merit goods is to provide subsidies
• What is the purpose of excise taxes on demerit goods?

  Discourage consumption
• What is the goal of subsidies in the context of merit goods?

  Reduce prices
• What is an example of a demerit good?

  Tobacco
• Demerit goods are socially undesirable and often over-consumed.

  True
• Merit goods are considered socially beneficial
• Why might individuals under-consume merit goods?

  Lack of information
• Match the type of good with its characteristic:

  Merit Goods ↔️ Under-consumed

  Demerit Goods ↔️ Over-consumed
• Market failure occurs when the socially optimal level of consumption is not achieved.


  True
• Demerit goods are socially undesirable and over-consumed
• Demerit goods are often over-consumed due to addiction or unawareness of consequences.


  True
• What are some reasons why merit goods may be under-consumed?

  Lack of information
• What are some government interventions to increase the consumption of merit goods?

  Subsidies, public provision
• Demerit goods contribute to health and social problems due to over-consumption.


  True