eco - classification of goods and services (merit and demerit goods)

what are private goods

goods consumed by people and not avaliable to others

what are some characteristics of private goods

excludability - others are excluded from goods done by price

rivalry - consumption by one person reduces the avaliability to others

what are public goods

provided by the state (govt) that the private sector will not produce

why will the private sector not produce public goods

initial sector costs are too high

little/ no profit is to be made from the goods

why do public goods have market failure

because it is not a case of whether too much or too little is provided but whether it is provided at all.

what are the two characteristics of a public good

they are non-excludable: once the good is provided, its difficult to stop others from using it

non rivalry: as more people consume the good the benefit of those already using the good will not be diminished

what is free-riding

people who use public goods who dont work

what is a quasi public good

if a good is closer to being a public good, but not fully public.

what are merit goods

goods that are better for a person than the person realises

e.g) people who are being educated don’t realise how valuable education is

what are some problems around merit goods

information failure and underconsumption of merit goods

people dont have the right information on how beneficial these goods are for them

demand will be lower so less of these goods will be produced

people may not have enough income to afford merit goods

what are demerit goods

a good that is worse for the person than they realise

what is paternalism

if we allow govts to decide what is good for a person.