Which of the following best describes a demerit good, such as high-sugar energy drinks, in a free market?
Non-rival and non-excludable, where marginal social benefit (MSBMSBMSB) exceeds marginal private benefit (MPBMPBMPB), leading to underconsumption.
Rival and excludable, where marginal private benefit (MPBMPBMPB) exceeds marginal social benefit (MSBMSBMSB), leading to overconsumption due to information failure.
Rival and non-excludable, where marginal social cost (MSCMSCMSC) is equal to marginal private cost (MPCMPCMPC), leading to market efficiency.
Non-rival and excludable, where marginal social cost (MSCMSCMSC) is less than marginal private cost (MPCMPCMPC), leading to underprovision.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.