What are merit goods?
Merit goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service.
Merit goods and services create positive externalities when consumed and these 3rd party spill over benefits can have a significant effect on social welfare. Market failure occurs when merit goods and services are under-consumed under free market conditions.
Policy intervention can help either through offering financial incentives (e.g. consumer or producer subsidies) or through behavioural nudges and information campaigns designed to change our choices.
What are the key differences between a merit good and a public good?
Who provides merit goods?
What are some good examples of merit goods?
Good examples of merit goods include health services, contraception, education, work training programmes, public libraries and museums, Citizen's Advice Bureaux and inoculations for children
Education as a merit good
Notice here that we are talking about the sorts of goods and services that society judges to be in our best welfare. Judgements involve subjective opinions – and we cannot escape from making value judgements when we are discussing merit goods.
Why does the government provide merit goods and services?
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