Goods that generate positive externalities and are under-consumed if left to market forces are called

Goods that generate positive externalities and are under-consumed if left to market forces are called

• A. Merit Goods
• B. Demerit Goods
• C. Public Goods
• D. Private Goods

Answer: (A)

Merit goods are goods that generate positive externalities, meaning society as a whole benefits more from their consumption than the individual buyer captures in their private benefit. Because people don’t value or pay for these extra benefits in their own decision, they tend to under-consume them when left to the market. Government intervention—such as providing the good for free or at subsidized levels, or promoting it through information campaigns—can push consumption up to a more socially desirable level. Examples include education and vaccination, where broader access improves welfare beyond what individuals would choose on their own.

Merit goods are goods that generate positive externalities, meaning society as a whole benefits more from their consumption than the individual buyer captures in their private benefit. Because people don’t value or pay for these extra benefits in their own decision, they tend to under-consume them when left to the market. Government intervention—such as providing the good for free or at subsidized levels, or promoting it through information campaigns—can push consumption up to a more socially desirable level. Examples include education and vaccination, where broader access improves welfare beyond what individuals would choose on their own.