Question 3(a)
[Maximum number: 8]
Explain what is meant by a merit good and why governments provide merit goods such as healthcare free of charge and consider why such provision may not always be successful.
CAIE A-Level Economics 3.1.2 Merit and Demerit Goods
Practise explaining merit-good underconsumption and demerit-good overconsumption, then comparing taxes, subsidies, information and direct provision as responses.
How this is tested
- explain underconsumption or overconsumption through imperfect information and external effects
- draw tax, subsidy or information-induced shifts and identify the change in consumption
- evaluate policy choice using PED, access, unintended substitution, cost and government failure