GCSE Economics Revision: Merit goods and demerit goods (With Mock Questions!)
👋 Hey, students!
Ready to smash your GCSE Economics exam? Let's dive into merit goods and demerit goods and get you feeling confident! This is an important topic, and you’ll want to be super clear on it before exam day.
What Are Merit Goods and Demerit Goods?
Merit goods are beneficial products or services that society values and believes everyone should have access to—think education or healthcare. But here's the catch: people may not always appreciate how much these goods benefit them, so they might under-consume them if left to the free market.
On the flip side, demerit goods are harmful products or services that people might over-consume because they don’t fully understand the negative consequences. Classic examples are cigarettes or alcohol. These goods can create problems for both individuals and society as a whole.
Key Learning Items:
✅ Understand what makes a good “merit” or “demerit”
✅ Know how governments intervene to control the consumption of these goods
✅ Be able to explain the positive externalities of merit goods and the negative externalities of demerit goods
What You Need to Demonstrate:
At this level, you'll need to clearly show that you know:
🌟 What defines merit and demerit goods
🌟 How the government uses policies to encourage or discourage consumption
🌟 The consequences of these goods on both individuals and society
Make sure you can explain these ideas with clear examples—especially in terms of externalities. And remember, you'll need to link these concepts to market failure in your answers.
Key Things to Remember Before the Exam:
💡 Make sure you can explain how merit and demerit goods contribute to market failure
💡 Be ready to discuss government policies like subsidies or taxes and how they work
💡 Practice defining key terms, but also focus on explaining why governments intervene
Oh, and don’t forget—practice those multiple-choice questions! Let’s get you started with a few mock questions to test your knowledge.
Mock Questions
Q1 - What is a common characteristic of merit goods?
a) They are typically harmful to society
b) They generate positive externalities
c) People tend to over-consume them
d) They are provided only by private firms
Q2 - Which of the following is a demerit good?
a) Vaccinations
b) Fresh vegetables
c) Cigarettes
d) Public transport
Q3 - How does the government typically encourage the consumption of merit goods?
a) By banning their use
b) By imposing taxes on them
c) By providing subsidies or free provision
d) By encouraging monopolies to produce them
Q4 - What is an example of a negative externality from a demerit good?
a) Increased education levels
b) Reduced healthcare costs
c) Air pollution from smoking
d) More public transportation
Q5 - Which of the following is a likely consequence of under-consuming merit goods?
a) Higher costs for public services
b) Increased government subsidies
c) Better market efficiency
d) Lower levels of inequality
To check your answers and see more questions check out our GCSE Economics Multiple-Choice booklet, with 250 sample questions and answers for you to revise
That's it for today! Keep revising, stay calm, and remember, you’ve got this!