Market Failure
Market Failure
Demerit goods
These are the goods which are harmful to the
consumers and have many external costs. They are
high in demand and will be overconsumed if left to
the market forces.
Examples for demerit goods are cigarettes people
who smoke get numerous diseases as a side affect
of smoking and the people around the who are
inhaling the smoke also get affected by it even tho
they aren’t the ones smoking.
These goods however are over consumed and
hence over produced to tackle this problem the
government can impose high taxes on the
production and consumption of these goods. They
can also provide information about how harmful
these products are. In some cases id deemed
necessary the government can ban the usage of
these products such as in some countries smoking
is banned in public places and people get fined if
they disobey this discourages consumption for
various reasons such as too many restrictions, high
cost, and feeling guilt about the disadvantages
you’re causing to yourself and the others around
you because they are now aware about what
they’re consuming and how it affects others and
themselves