Merit Good
What is a merit good?
A good that has positive externalities but is underprovided in the free market.
What is a demerit good?
A good that causes negative externalities and is overprovided in the free market.
What are public goods?
These goods are underprovided in the private sector because they do not generate profits
What is rivalry?
A characteristic of private goods where one person’s consumption prevents another from consuming the same item
What is air?
An example of a free good that is essential for life
What is education?
An example of a merit good that improves skills in the workforce.
What is passive smoking or second-hand smoke
The negative externality caused by smoking, affecting people nearby.
What is non-rivalry?
A characteristic of public goods where one person’s use does not prevent another person from using it.
What are private property rights?
The type of rights that allow owners to prevent others from consuming their goods
What is opportunity cost
The value of next best alternative foregone.
What are positive externalities?
The economic term for benefits to third parties from consuming merit goods.
What is alcohol or cigarettes?
An example of a demerit good that is harmful to health but commonly consumed.
What is the free-rider problem?
A problem that occurs when people benefit from public goods without paying for them.
What is a private good?
A product that must be purchased to be consumed, and consumption by one individual prevents another individual from consuming it.
What are free goods?
These goods are not traded because they are freely available
What is information failure?
Consumers often underconsume merit goods due to this failure.
What is information failure?
Demerit goods are associated with this failure, as consumers do not understand their long-term effects
What is a flood control system?
An example of a public good that provides safety during storms
What are economic goods?
These goods benefit society but are scarce and have an opportunity cost.
What is water?
A free good that can sometimes become scarce due to pollution or overuse
What is healthcare?
An example of a merit good that provides societal health benefits.
What are negative externalities?
The economic term for the harm caused to third parties from consuming demerit goods
What are the free-rider problem and difficulty in pricing the value of public goods?
The two main reasons why public goods are underprovided by the private sector.
What are rivalry and excludability?
The two main characteristics of private goods
What is scarcity?
The primary difference between free goods and economic goods.