Uploaded May 2026 | Updated September 2026, 2 weeks ago
Demerit goods are over-consumed because individuals ignore long-term harms (information failure) and spillover costs to society (negative externalities). In free markets, private demand exceeds the socially optimal level. The UK government intervenes using taxes, regulations, or bans to internalise these external costs and reduce consumption.
Demerit goods are over-consumed because individuals ignore long-term harms (information failure) and spillover costs to society (negative externalities). In free markets, private demand exceeds the socially optimal level. The UK government intervenes using taxes, regulations, or bans to internalise these external costs and reduce consumption.
