Joseph Thomson 13.3
Q11. Explain why imperfect information might lead to a market failure in the case of merit
goods and demerit goods. (15 marks)
Plan
Intro - define imperfect / asymmetric information and a merit good.
Consumers may not understand that merit goods generate positive externalities…
Diagram showing overconsumption and overproduction of demerit goods.
Market failure as welfare isn’t maximised…
Q11. Explain why imperfect information might lead to a market failure in the case of merit
goods and demerit goods. (15 marks)
Plan
Intro - define imperfect / asymmetric information and a merit good.
Consumers may not understand that merit goods generate positive externalities…
Diagram showing overconsumption and overproduction of demerit goods.
Market failure as welfare isn’t maximised…
