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Government may apply some note on the package of a demerit good for example cigarettes, when you buy cigarette you may see some warning on the front of the package in order to prevent you to buy it.

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🇧🇪🇩🇰🇨🇦Free market

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6666

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I love study economics

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🇨🇳🇮🇳Mix market

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mixed 🇨🇳

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🇬🇧🇺🇸🇯🇵Free market

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bb

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mixed🇨🇳

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e.g. compulsory labelling on cigarette packets.

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where people do not have full or complete information.

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Merit goods are goods that has positive side effects when consumed. For example, education and healthcare are merit goods. In a mixed economy, the government and market forces are both involved in resource allocation decisions.
Merit goods may be underconsumed in the mixed economy because there is information failure, which means that people do not have full or complete information. An individual who make decisions about how much merit goods to receive do not fully appreciate quite how much benefits will be received after consuming

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Merit goods are goods whose consumption creates positive externalities; are socially desirable but under-provided by the market and under-consumed; require government policies to increase their production and consumption. For example, infrastructures like natural gas. A mixed economy is one where market forces and government, private and public sectors are involved in resource allocation decision. In a mixed economy, because of the information failure, consumers might not realize the advantages of buying merit goods.
Maximum price is a maximum price on a good set by the government that is below the equilibrium price of the market, resulting in a shortage. It can make some necessities affordable to poor people. Consumers who buy the good at the maximum price(lower price) gain. However, it might cause underground markets since there are unsatisfied buyers at the maximum price, some people buy the good at the maximum price and illegally re-sell it at a higher price. Also, maximum price would lead inefficient resource allocation since less is produced than the it is on the equilibrium price before.
Education campaigns like advertising could help people to understand the beneficial effects of buying merit goods. However, government needs to pay for advertising, where has an opportunity cost that government may pay less in infrastructure or other public goods. As for long-term perspective, it makes people aware of the positive externalities that bring to society.
In conclusion, maximum price might be more effective in short-run. Nevertheless, from my point of view, the combination of maximum price and the education campaigns will be more effective than using one of them alone.

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one where market forces and government, private and public sectors are involved in resource allocation decisions.

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merit goods are goods that are held to be desirable for consumers, but which are underprovided by the market.

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Merit goods are the goods and services that generate positive externalities when consuming and are under-consumed for most of the time. Mixed economy is α mixture of market and economic planning, public ownership and private ownership. Maximum price is the legal limitation set by the government on price above which α firm cannot set price.

In α mixed economy, merit goods may be under-consumed for some reasons. Firstly, due to information failure, consumers may not realize the benefit brought by merit goods. For example, citizens may not understand how beneficial education system is. Secondly, merit goods can be produced by private ownership and public ownership, while both consist of some problems. For private firms, since they are profit-motivated, they may set the price higher than usual. Private education systems are generally more expensive than public education systems. In this way, some consumers may not buy as much due to the price. From another perspective, for merit goods produced by government, since the government does not focus on profit generating, the quality of the goods are sometimes not as satisfied as that of produced by private firms. Although the price may be lower, consumers may not consume due to low quality.

Maximum price may be able to decrease the price in the market. As α result, demand for merit goods increases, leading to more consumption of merit goods. However, this may not be as effective for some reasons and alternative policies can be introduced.
Firstly, maximum price creates α shortage. Although quantity demanded increases as price decreases, quantity supplied may decrease. In this way, the consumption of merit goods may be limited by the supply. Secondly, black market (underground market) may emerge due to the excess demand. (An alternative which can be more effective may be subsidies. By providing subsidies, government is able to encourage supply and lower the price in the market without shortage. )

Education campaigns, including advertisement, can provide the consumers with the knowledge of merit goods' positive effects. However, providing advertisement requires spending of money. In this way, government need to make α cost-benefit analysis of which alternative may be most beneficial. In stead of invest on advertisement, government can invest those money on building roads and railways, constructing infrastructures, improving health care system.

To sum up, maximum prices may not be as effective as generally thought, and advertisement alone may not be successful either. In return, government may choose to introduce α combination of different policies, e.g. subsidies, maximum price, and advertisement, to encourage the consumption of merit goods.

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Merit good is one that has positive side effects when consumed.

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Merit good is one that has positive side effects when consumed.

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(b) Discuss why merit goods may be under-consumed in a mixed economy. Consider whether
maximum prices or education campaigns would be more effective in ensuring that these goods are supplied in appropriate quantities. [12]

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Firms could make profits from producing private goods like chocolate cake instead of public good like lighthouse as the excludability  and rivalry of private goods. Excludabilty makes firms be able to provide products only for consumers who is able to pay the price, this makes sure they could get revenue from the sales. Besides, rivalry makes sure that one cake can only be consumed by one person once, therefore anyone who want a cake has to pay for it. Free rider problem is unable to exist.

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Private goods have rivals so it allows competition between two private goods, for example McDonald's and KFC they are rivals and they are public goods, so they may compete with each other in order to get more profit than others.

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A public good is a good that is non-rivalrous and non-excludable. Non-rivalrous means that it is use by one doesn't make it less available for use by others, and non-excludable means that it is not possible to charge a price and therefore excludable people from using the good. For example, national defense and streetlights are public goods. Private good are the goods consumed by someone and not available to anyone else, which is excludable and rivalrous. For example, cake is a kind of private good.
A profit could be made from the production of private goods but not public goods. For the reason that private goods will not be produced if firms cannot charge its price. In conclusion, a profit can be made through the supply of private goods, not the public goods.

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Public goods are the goods and services that are non-rival and non-excludable. However, free-rider problem may occur for public goods cannot prevent non-paying consumers from accessing it. For firms, it is hard to charge on public goods, hence they cannot make profit by providing the public goods. An example of public goods is national defence: government still have to protect the citizens even though they may not pay for it.

In comparison, private goods are the goods and services that are rival and excludable. Consumption of one consumer may diminish others' consuming, and private goods can easily prevent consumers from accessing and using if they choose not to pay for it. For example, α consumer may not enjoy the cake if he/she doesn't buy it. This makes the firms easy to charge on the goods. They can set α reasonable selling price which is higher than the cost of production to gain profit on each unit of product they sell.

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Privates goods are excludable. Public goods are non-excludable.

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Privates goods are excludable. Public goods are non-excludable.

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Private goods are rival and excludable, while public goods are non-rival and non-excludable. These characteristics of public goods make it unable to be charged a price, so they cannot be provided in the free market.

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free-rider problem

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If α good or service is non-excludable, non-paying consumers cannot be prevented from accessing it. It can be used by everyone and price doesn't restrict access to the good or service.

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Non-rival means that as more consume, the benefit to those already consuming is not diminished.

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Non-rival means that as more consume, the benefit to those already consuming is not diminished.

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Write something...

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behavior youself

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Private goods are the goods consumed by someone and not available to anyone else.

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Private goods are the goods consumed by someone and not available to anyone else.

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Explain the difference between public goods and private goods. Consider why profit can be
made through the supply of one type of good, but not the other. [8]