Merit goodsSyllabus: Explain that merit goods are goods whose consumption creates external benefits.
|Definition: Merit Goods are socially desireable and are either under-produced or under-consumed due to positive externalities and the market.|
Examples of merit goods include education, health care, welfare services, housing, fire protection, refuse collection and public parks.
Merit goods are, provided through the market, but not in sufficient quantities to maximise social welfare. While goods such as education and health care are provided by the state, there is also a parallel, thriving private sector provision. Indeed, there is considerable disagreement between economists on the right and left of the political spectrum over the extent to which such goods should be provided by the state or the private sector.