Which term describes goods that are detrimental to consumers and are often over-consumed?

Which term describes goods that are detrimental to consumers and are often over-consumed?

• A. Merit Goods
• B. De-merit Goods
• C. Public Goods
• D. Normal Goods

Answer: (B)

Some goods are considered harmful to health or welfare and are often consumed more than is socially desirable. These are de-merit goods. The idea is that individuals may not fully take into account the negative effects of consuming them, or they may be addicted, so consumption overshoots the socially optimal level. Governments frequently intervene with taxes or restrictions to curb use and reduce social costs, which is tied to the notion that these goods impose costs on society beyond the price paid by the buyer. Examples include tobacco, alcohol, and other unhealthy choices. By contrast, merit goods are benefits that people tend to underconsume because they don’t fully recognize their value; public goods are things like national defense or clean air that markets typically fail to provide efficiently due to non-excludability and non-rivalry; normal goods are simply goods whose demand rises as income increases, not inherently harmful.

Some goods are considered harmful to health or welfare and are often consumed more than is socially desirable. These are de-merit goods. The idea is that individuals may not fully take into account the negative effects of consuming them, or they may be addicted, so consumption overshoots the socially optimal level. Governments frequently intervene with taxes or restrictions to curb use and reduce social costs, which is tied to the notion that these goods impose costs on society beyond the price paid by the buyer.

Examples include tobacco, alcohol, and other unhealthy choices. By contrast, merit goods are benefits that people tend to underconsume because they don’t fully recognize their value; public goods are things like national defense or clean air that markets typically fail to provide efficiently due to non-excludability and non-rivalry; normal goods are simply goods whose demand rises as income increases, not inherently harmful.