How under-provision of merit goods and over-provision of demerit goods may also result from imperfect information
Consumers often lack accurate information about how good or harmful a product really is. This causes them to buy too little of beneficial goods and too much of harmful ones.
Real World
Many UK students chose not to pursue university in the early 2000s because they underestimated lifetime earnings gains — leading to under-consumption of a merit good despite its high social return.
Exam Focus
State explicitly that information failure causes MSB ≠ MPB; examiners penalise answers that conflate imperfect information with externalities.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
How well did you know this?