Demerit good
Definition. A demerit good is a good that is considered harmful to consumers and is over consumed because individuals underestimate or ignore its private and external costs. Left to the free market it is produced and consumed in quantities above the socially optimal level, so it represents a market failure.
Examples include tobacco and alcohol, which generate negative externalities and arise partly from imperfect information. Governments often respond with taxes, regulation or information campaigns to curb consumption.
This term belongs to Merit and Demerit Goods in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use demerit good for marks in the exam? Learn it in class or message the team.