Merit and Demerit Goods (AQA A-Level Economics): Flashcards

Good where social benefits exceed private benefits

Good where social costs exceed private costs

Private benefit + External benefit

Private cost + External cost

Under-consumption (below socially optimal level)

Over-consumption (above socially optimal level)

Subsidy to lower price and increase consumption

Indirect tax to raise price and reduce consumption

People focus on short-term, ignore long-term consequences

Essential for classifying goods as merit or demerit