1.3.3 Merit and demerit goods

• Demerit goods cause significant social harm when consumed.

  True
• Match the type of good with an example:

  Merit good ↔️ Healthcare

  Demerit good ↔️ Alcohol
• Arrange the examples of merit goods in order of their contribution to societal well-being:

  1️⃣ Healthcare

  2️⃣ Education

  3️⃣ Vaccination
• Demerit goods are often over-consumed because their negative consequences are fully understood by consumers.

  False
• What is a common government intervention to reduce the consumption of demerit goods?

  Taxes
• Merit goods provide substantial social harm when consumed.

  False
• Demerit goods are under-consumed in a free market.

  False
• Merit goods provide substantial social benefit
• Why are demerit goods often over-consumed in a free market?

  Negative consequences are underestimated
• What is a key characteristic of merit goods in terms of consumption?

  Under-consumed
• What are the two main categories of government intervention in markets for merit and demerit goods?

  Subsidies and taxes
• Demerit goods are often over-consumed because consumers fully appreciate their negative consequences.

  False
• Healthcare and education are examples of merit goods.


  True
• Demerit goods are often over-consumed because consumers do not fully appreciate the negative consequences
• Why do consumers tend to underestimate the harm caused by demerit goods?

  Discount long-term harm
• What is the primary characteristic of demerit goods in terms of social consequences?

  Significant social harm
• What property of demerit goods, like tobacco and alcohol, makes it difficult for consumers to limit consumption?

  Addictive nature
• What is the primary characteristic of merit goods in terms of social consequences?

  Substantial social benefit
• Demerit goods are over-consumed because consumers fully appreciate the negative consequences.

  False
• Fast food is a demerit good that contributes to obesity and heart disease.


  True
• Why are demerit goods often over-consumed in a free market?

  Lack of understanding
• Demerit goods are often over-consumed in a free market because consumers do not fully appreciate the negative consequences.
• Demerit goods cause significant social harm
• What are three measures governments use to address the under-consumption of merit goods?

  Subsidies, promotion, mandates
• Examples of merit goods include healthcare and education
• Addictive properties of demerit goods make it difficult for consumers to limit their consumption


  True
• What is one reason why demerit goods are over-consumed in a free market?

  Consumers underestimate harm
• Steps in government intervention for demerit goods:

  1️⃣ Consumers lack full information

  2️⃣ Over-consumption leads to social harm

  3️⃣ Government imposes taxes

  4️⃣ Restrictions limit access

  5️⃣ Public health campaigns raise awareness
• Merit goods are underprovided because consumers undervalue their benefits
• Demerit goods are often over-consumed because consumers do not appreciate the negative consequences
• Merit goods are under-consumed because consumers lack information
• Match the demerit good with its social harm:

  Tobacco ↔️ Lung cancer

  Alcohol ↔️ Drunk driving

  Fast food ↔️ Obesity
• What are merit goods under-consumed in a free market due to?

  Undervaluation or lack of information
• Why do individual consumers often undervalue merit goods?

  Focus on private benefits
• Match the demerit good with its social harm:

  Tobacco ↔️ Lung cancer

  Alcohol ↔️ Drunk driving

  Fast food ↔️ Obesity
• What is one social benefit of healthcare as a merit good?

  Improved public health
• Tobacco is an example of a demerit good that causes lung cancer
• Demerit goods are often over-consumed because consumers do not fully appreciate the negative consequences
• What is a characteristic of merit goods in a free market?

  They are under-consumed
• Why are demerit goods over-consumed in a free market?

  Consumers undervalue negative consequences