Classification of goods and services 商品和服务的分类
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nature and definition of merit goods: under-consumption as a result of imperfect information in the market
- Merit goods: goods and services that have positive side effect on third parties
- Examples: education, healthcare
- Under-consumption of merit goods is a result of imperfect information in the market.
- This occurs when individuals lack complete information about the benefits of these goods.
- As a result, they do not consume enough of these goods to maximize their welfare, and this leads to a market failure.
- The government steps in to provide these goods to ensure that everyone has access to them and to prevent under-consumption.
nature and definition of demerit goods: over-consumption as a result of imperfect information in the market
- Demerit goods are goods and services that are considered to have negative effects on individuals and society when consumed in excessive amounts.
- Examples: tobacco, alcohol, and gambling.
- Over-consumption of demerit goods is a result of imperfect information in the market.
- This occurs when individuals do not fully understand the negative consequences of excessive consumption of these goods, or when they face constraints such as addiction or lack of self-control that prevent them from moderating their consumption.
- As a result, they consume more of these goods than is optimal for their welfare, and this leads to a market failure.
- The government steps in to regulate the consumption of demerit goods through taxes, restrictions on advertising, and age limits to prevent over-consumption and reduce the negative externalities associated with their consumption.