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define demerit goods
goods that not just have a cost to those consuming them but to the rest of society too. they have negative externalities
why does the government try control de merit goods
can cause negative externalities
consumers may be unaware about long term damage to own health via imperfect information
banning or limiting may reduce demand however lead to black market economies
market failure with demerit goods
the free market may fail to take into account negative externalities because the social cost is higher than the private cost. as well as imperfect information
case studies 2
obesity. social costs that come from obesity. 2/3 every american is overweight 1/3 expected to have diabetes by 2025
drugs. Regulation is currently costly and hard to do. suggestions such as legalisation and taxation or increased information such as removal of branded cigarettes
