ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Demerit goods are goods which are deemed to be socially undesirable, and which are likely to be over-produced and over-consumed through the market mechanism. Examples of demerit goods are cigarettes, alcohol and all other addictive drugs such as heroine and cocaine.

Detailed explanation-2: -Tobacco, alcoholic drinks, addictive substances, betting, unhealthy snacks, pornography, and prostitution are examples of demerit goods. Due to the obvious nature of these items, governments frequently impose taxes on them (particularly, sin taxes), as well as limiting or prohibiting their usage or advertisement.

Detailed explanation-3: -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"; it could be over-consumed if left to market forces.

Detailed explanation-4: -A demerit good is defined as a good which can have a negative impact on the consumer – but these damaging effects may be unknown or ignored by the consumer. Demerit goods also usually have negative externalities – where consumption causes a harmful effect on a third party.