De-Merit Goods

De-merit goods deliver a lower benefit to the consumer than he/she realises at the time of consumption. They tend to be over-consumed in the free market leading to a misallocation of resources, i.e. market failure. It is important to remember that value judgements are nearly always involved in what constitutes a de-merit good. To what extent should the state intervene in the market - through taxes, subsidies, regulations and behavioural nudges - to influence consumer choices and market outcomes? This short revision video looks at some of the issues.