Merit & Demerit Goods (AS/A LEVELS/IB/IAL)

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

The classification of a Merit Good and a Demerit Good depends upon a value judgement

Merit Goods

Merit goods provide a benefit to individuals and society. They provide positive externalities through consumption or production of goods and services.

Unfortunately, not everyone is aware of the benefits of merit goods. This has caused under-consumption of these goods in society.

Examples of merit goods include health and education

Demerit Goods

Demerit goods are damaging to individuals and society. They provide a negative externality through consumption and production.

Due to asymmetric information individuals are sometimes unaware of the negative impacts caused by demerit goods.

E.g. Alcohol, Cigarettes, Illegal drugs

Quick Fire Quiz – Knowledge Check

1. Define a ‘Merit Good’ (2 marks)

2. Define a ‘Demerit Good’ (2 marks)

3. Identify two examples of a Merit Good (2 marks)

4. Identify two examples of a Demerit Good (2 marks)

5. Explain the problem surrounding Merit Goods in the market (3 marks)

6. Explain the problem surrounding Demerit Goods in the market (3 marks)

Next Revision Topics:

• Externalities
• Symmetric & Asymmetric Information
• Market Failure
• Free Market, Mixed, and Command Economies
• Maximum Prices (Price Ceilings)

A Level Economics Past Papers

• AQA
• Edexcel
• OCR
• WJEC