What is a Merit good? Give and example and explain..

Merit goods are goods that are under-consumed. They provide positive externalities and so the social benefit from consumption outweighs the private benefit. Market failure occurs when merit goods are under-consumed in free market conditions; government intervention helps solve this when subsidies are applied and so the prices to consumers lower and demand for the good raises.An example of a merit good is education. Education is beneficial to the individual in the long term as they can have higher earnings. It is even more beneficial to the third parties as it can reduce unemployment, create rising incomes and raise productivity. would also show a positive externality diagram

Answered by Isabella W. Economics tutor

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