In economics, a demerit good is "a good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves";[1][2][3] it could be over-consumed if left to market forces of supply and demand. Examples of demerit goods include tobacco, alcoholic beverages, recreational drugs, gambling, junk food, and prostitution. Because of the nature of these goods, governments often levy taxes on these goods (specifically, sin taxes), in some cases regulating or banning consumption or advertisement of these goods.[4]
There is an important conceptual distinction between a demerit good and a negative externality. A negative externality occurs when the consumption of a good has measurable negative consequences on others who do not consume the good themselves.[5] Pollution (due, for example, to automobile use) is the canonical example of a negative externality. By contrast, a demerit good is considered as undesirable because its consumption has negative effects upon the consumer. Cigarettes have both properties – they are a demerit good because they damage the smoker's own health, but they also produce the negative externality of damage to others by second-hand smoke.
Two fundamental opinions of welfare economics, welfarism and paternalism, differ in their conceptual treatment of 'demerit goods'. Simply, welfarism considers the individual's own perception of the utility of a good as the final judgement of the utility of the good for that person, and thereby disallows the concept of a 'demerit good' (while allowing the analysis of negative externalities). As an extreme example, if a heroin addict purchases heroin, they must have done so because heroin makes them better somehow, and this transaction is considered therefore as a net social positive (assuming that the addict does not commit any other crimes as the result of their addiction). Paternalism judges that heroin "isn't good for you", and feels free to override the judgement of the addicts themselves.[6]
demerit, good, this, article, multiple, issues, please, help, improve, discuss, these, issues, talk, page, learn, when, remove, these, template, messages, this, article, needs, additional, citations, verification, please, help, improve, this, article, adding, . This article has multiple issues Please help improve it or discuss these issues on the talk page Learn how and when to remove these template messages This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Demerit good news newspapers books scholar JSTOR November 2016 Learn how and when to remove this template message This article possibly contains original research Please improve it by verifying the claims made and adding inline citations Statements consisting only of original research should be removed February 2009 Learn how and when to remove this template message Learn how and when to remove this template message In economics a demerit good is a good or service whose consumption is considered unhealthy degrading or otherwise socially undesirable due to the perceived negative effects on the consumers themselves 1 2 3 it could be over consumed if left to market forces of supply and demand Examples of demerit goods include tobacco alcoholic beverages recreational drugs gambling junk food and prostitution Because of the nature of these goods governments often levy taxes on these goods specifically sin taxes in some cases regulating or banning consumption or advertisement of these goods 4 Contents 1 Concept 2 See also 3 References 4 Further readingConcept editThere is an important conceptual distinction between a demerit good and a negative externality A negative externality occurs when the consumption of a good has measurable negative consequences on others who do not consume the good themselves 5 Pollution due for example to automobile use is the canonical example of a negative externality By contrast a demerit good is considered as undesirable because its consumption has negative effects upon the consumer Cigarettes have both properties they are a demerit good because they damage the smoker s own health but they also produce the negative externality of damage to others by second hand smoke Two fundamental opinions of welfare economics welfarism and paternalism differ in their conceptual treatment of demerit goods Simply welfarism considers the individual s own perception of the utility of a good as the final judgement of the utility of the good for that person and thereby disallows the concept of a demerit good while allowing the analysis of negative externalities As an extreme example if a heroin addict purchases heroin they must have done so because heroin makes them better somehow and this transaction is considered therefore as a net social positive assuming that the addict does not commit any other crimes as the result of their addiction Paternalism judges that heroin isn t good for you and feels free to override the judgement of the addicts themselves 6 See also editPigovian tax Soda tax Taxation and regulation of alcohol production Tobacco taxReferences edit Demerit Good Law amp Legal Definition USLegal com Definition of demerit good BusinessDictionary Archived from the original on 2016 11 17 Retrieved 2016 11 17 Pettinger Tejvan November 28 2012 Demerit good definition Economics Help Government responses demerit goods sanandres esc edu ar Demerit Goods Economics Online 17 January 2020 Niel Bruce Boadway Robin W 1984 Welfare economics John Wiley and Sons ISBN 9780631133278 Further reading editBoadway Bruce 1984 Welfare Economics Basil Blackwell ISBN 9780631133278 nbsp This trade related article is a stub You can help Wikipedia by expanding it vte Retrieved from https en wikipedia org w index php title Demerit good amp oldid 1187243059, wikipedia, wiki, book, books, library,
