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What makes a good a demerit good rather than merely a harmful good?
A good that is under-consumed because consumers have perfect information about its benefits, with a positive value judgement that society should consume more.
A good that is over-produced because firms have imperfect information about production costs, with a negative value judgement that society should produce less.
A good that is harmful because producers impose costs on third parties, with a negative value judgement that society should tax all consumption.
A good that is over-consumed because consumers have imperfect information about its true harm, with a negative value judgement that society should consume less.
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1.6.4 nature and definition of demerit goods: over-consumption as a result of imperfect information in the market Flashcards
20 flashcards on CIE Intl A Level Economics 1.6.4 nature and definition of demerit goods: over-consumption as a result of imperfect information in the market: the key terms and definitions you need to recall.