Market Failures

Market Failure is a situation in which the free market mechanism does not lead to an optimal allocation of resources.

Merit Goods

A merit good is a good that the marginal social benefit exceeds the marginal private benefit, so consumption is beneficial to society. Merit goods are usually under-consumer. Examples are education and healthcare.

Demerit Goods

A demerit good is a good that the marginal private benefit exceeds the marginal social benefit and so is usually over-consumed, consumption is usually harmful to society. Examples are cigarettes, drugs and alcohol.

Page last updated on 20/10/13