Practise explaining merit goods as under-consumed private goods because consumers underestimate their benefits and assessing education, healthcare or libraries against…
When a planned economy introduces the price mechanism to allocate some resources, a mixed economy arises.
Explain, using examples, why merit goods are classified as private goods rather than public goods.
When a planned economy introduces the price mechanism to allocate some resources, a mixed economy arises.
Explain, using examples, why merit goods are classified as private goods rather than public goods.
Knowledge and Understanding:
For knowledge and understanding of private goods. (1 mark)
For knowledge and understanding of public goods. (1 mark)
2 marks maximum
Application:
The use of appropriate examples to aid the explanation of why merit goods are classified as private goods.
(Up to 3 marks)
The use of appropriate examples to aid the explanation of why merit goods are not classified as public goods
(Up to 3 marks)
6 marks maximum
8
Private goods:
- economic goods that are consumed by an individual for their own benefit
- there is rivalry in consumption, i.e., when a product is consumed by one person, it cannot be consumed by another
- there is excludability in consumption, i.e., when a product is consumed by one person, all others are excluded from it.
Public goods:
- are non-rival
- are non-excludable
- are non-rejectable
Examples of merit goods:
- education
- healthcare
Examples of public goods:
- street lighting
- defence
- police