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Fuel economy labels - demerit goods

Jim Riley

26th May 2011

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This year I bought my first ever car. I absolutely love it, comments about it being a hairdressers car have not impact on me whatsoever but I am starting to wish it didn’t use up so much petrol.

Maybe I would have bought a more sensible car if the UK had fuel economy labels like the ones being introduced in the US.

As large gas guzzling cars are demerit goods, this example could be used in a lesson to show how providing information to customers about the negative externalities of their purchase could reduce the consumption of demerit goods.

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Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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