1.3.3 Merit and demerit goods

• What is the primary reason merit goods are under-consumed?

  Imperfect information
• Merit goods are beneficial to consumers and society
• A flu shot provides both a private and social benefit.
• What do positive externalities of merit goods contribute to overall?

  Societal welfare
• Vaccination reduces disease spread, improving public health
• Government intervention in merit good markets is justified to address under-consumption.
• Why are merit goods often under-consumed?

  Imperfect information
• Education provides a private benefit to the individual and a social benefit through increased productivity
• Match the benefit type with its description for merit goods:

  Private Benefit ↔️ Direct benefits to the consumer

  Social Benefit ↔️ Total benefits to consumer and society
• Positive externalities of merit goods contribute to correcting market failures.
• What is a key benefit of vaccination as a positive externality of merit goods?

  Improved public health
• Education and skills training lead to higher workforce productivity
• Government intervention in merit good markets aims to address imperfect information.
• Why does under-consumption of merit goods occur?

  Imperfect information
• People often prioritize immediate costs over long-term benefits
• Match the aspect of merit goods with its corresponding benefit or cost:

  Individual ↔️ Improved health, better education

  Society ↔️ Enhanced public health, increased productivity
• Understanding the reasons for under-consumption is crucial for developing effective policies.
• Consumers rely on others to consume merit goods, benefiting from herd immunity or community safety
• Improved health is a private benefit of merit goods for individuals.
• Match the aspect of merit goods with its description:

  Individual Benefit ↔️ Improved health or education

  Social Benefit ↔️ Enhanced public health or productivity
• Under-consumption of merit goods occurs when the quantity consumed is less than what would maximize overall social welfare
• Present bias leads individuals to prioritize immediate costs
• Free riding refers to relying on others to consume merit goods without contributing.
• Order the methods of government intervention in merit good markets:

  1️⃣ Subsidies

  2️⃣ Public Provision

  3️⃣ Regulations

  4️⃣ Public Awareness Campaigns
• Subsidies increase consumption but may distort market prices
• Public provision ensures access to merit goods for everyone.
• Merit goods are often under-consumed due to imperfect information
• Positive externalities of merit goods benefit third parties.
• Vaccination reduces disease spread, improving public health
• Match the benefit type with its example:

  Individual Benefit ↔️ Personal health improvement

  Social Benefit ↔️ Enhanced public health
• Government actions encourage higher consumption of merit goods to align individual choices with societal needs
• Subsidies reduce the price of merit goods, making them more accessible.
• What is an example of public provision of merit goods by the government?

  Free public schools
• Regulations mandate or incentivize consumption, such as mandatory vaccinations to prevent disease
• What is the purpose of public awareness campaigns for merit goods?

  Educate consumers
• Match the government intervention method with its advantage:

  Subsidies ↔️ Increases consumption

  Public Provision ↔️ Ensures access for all

  Regulations ↔️ Effective in reaching goals

  Public Awareness Campaigns ↔️ Influences behavior
• Public provision of merit goods can be inefficient and expensive.
• Demerit goods produce negative externalities, affecting third parties not directly involved in consumption
• Why are demerit goods often over-consumed by individuals?

  Imperfect information
• Government regulations such as taxes or bans are used to reduce the consumption of demerit goods.