Unit 2.8 · Market Failure: Externalities and Common Pool Resources
Merit and Demerit Goods
AO2
Syllabus Requirement
Merit goods are under-consumed and under-provided (e.g., education), while demerit goods are over-consumed (e.g., cigarettes).
Assessment Objectives
AO2Application and Analysis
Summary
This topic examines merit and demerit goods, focusing on how market failures can lead to inefficient allocation of resources. It highlights the consequences of under-provision and over-provision of goods and services, as well as the distinction between private and social costs and benefits, which is essential for understanding externalities in economics.