merit good

Examples of merit good in the following topics:

• Causes of Market Failure

  • Market failure occurs due to inefficiency in the allocation of goods and services.
  • Lack of public goods: public goods are goods where the total cost of production does not increase with the number of consumers.
  • Underproduction of merit goods: a merit good is a private good that society believes is under consumed, often with positive externalities.
  • For example, education, healthcare, and sports centers are considered merit goods.
  • Overprovision of demerit goods: a demerit good is a private good that society believes is over consumed, often with negative externalities.

• Defining Market Failure

  • The market will fail by not supplying the socially optimal amount of the good.
  • The imbalance causes allocative inefficiency, which is the over- or under-consumption of the good.
  • direct provision of merit and public goods - governments control the supply of goods that have positive externalities.
  • taxation - placing taxes on certain goods to discourage use and internalize external costs.
  • subsidies - reducing the price of a good based on the public benefit that is gained.

• What is Economics?

  • Valuation is the process by which individuals assign worth, merit or importance to a phenomenon (good or event).
  • Economics then is the study of processes by which individuals and societies value resources, goods, alternatives, choices, and behavior.

• Arguments For and Against Fighting Recession with Expansionary Fiscal Policy

  • Due to the funding process of expansionary policy, there is a lack of consensus among economists with respect to the merits of fiscal stimulus.
  • This may in turn reduce aggregate demand for goods and services, which defeats the purpose of a fiscal stimulus.

• Introduction to the Role of the Government in the Economy

  • The country's economic success seems to validate the view that the economy operates best when government leaves businesses and individuals to succeed -- or fail -- on their own merits in open, competitive markets.

• Demand for Public Goods

  • The aggregate demand for a public good is derived differently from the aggregate demand for private goods.
  • The marginal benefit of a public good diminishes as the level of the good provided increases.
  • Public goods are non-rivalrous, so everyone can consume each unit of a public good.
  • The aggregate demand for a public good is the sum of marginal benefits to each person at each quantity of the good provided .
  • Unlike public goods, society does not have to agree on a given quantity of a private good, and any one person can consume more of the private good than another at a given price.

• Defining a Good

  • Private goods: Private goods are excludable and rival.
  • Common goods: Common goods are non-excludable and rival.
  • Club goods: Club goods are excludable but non-rival.
  • This type of good often requires a "membership" payment in order to enjoy the benefits of the goods.
  • Public goods: Public goods are non-excludable and non-rival.

• Cross-Price Elasticity of Demand

  • For substitute goods, as the price of one good rises, the demand for the substitute good increases.
  • Conversely, the demand for a substitute good falls when the price of another good is decreased.
  • Two goods that complement each other have a negative cross elasticity of demand: as the price of good Y rises, the demand for good X falls.
  • Two goods that are substitutes have a positive cross elasticity of demand: as the price of good Y rises, the demand for good X rises.
  • Two goods that are independent have a zero cross elasticity of demand: as the price of good Y rises, the demand for good X stays constant.

• Optimal Quantity of a Public Good

  • Unlike the market demand curve for private goods, where individual demand curves are summed horizontally, individual demand curves for public goods are summed vertically to get the market demand curve.
  • Often, the government supplies the public good.
  • The supply curve for a public good is equal to its marginal cost curve.
  • The public good provider uses cost-benefit analysis to decide whether to provide a particular good by comparing marginal costs and marginal benefits.
  • The optimal quantity of public good occurs where MB = MC.

• Economics as a Study of the Allocation of Scarce Resources

  • What goods and services should be produced?
  • Since not everything can be produced, some goods must be sacrificed for other goods.
  • There are often different ways to produce a good.
  • The amount of the good to be produced may influence the ways in which a good is produced
  • The distribution of goods among the members of society may also influence the ways in which different goods are valued.