Merit goods and positive consumption externalities
With education, few students will know with any precision the benefit to themselves of being educated, let alone the benefit to others. In other words, there is imperfect information. Remedies for…
The supply of merit goods
Economic theory predicts that while markets may form to supply some merit goods, total supply will be insufficient to achieve asocially efficient level of consumption. A number of factors explain the…
Merit goods
The market for merit goods is an example of an incomplete market. Merit goods have two basic characteristics: Firstly, unlike a private good, the net private benefit to the consumer is not fully recognised at…
Turnpikes
In the UK, turnpikes were an increasingly common way of paying for the maintenance costs of major roads from the early 18thCentury. The UK government allowed private companies, known as…
Quasi public goods
The market for quasi-public goods is an important example of an incomplete market. A quasi-public good is one that resembles a pure public good, but lacks some of its characteristics.…
Incomplete markets
An incomplete market is one where some of the necessary conditions for market formation exist, but not all of them. In the case of incomplete markets, some entrepreneurs may enter…
Pure public goods
The market mechanism is likely to fail to supply pure public goods because entrepreneurs are unlikely to enter the market, given the impossibility of charging consumers at the point of…
Missing markets
A significant market failure is the failure to produce some goods and services, despite being needed or wanted. Markets can only form under certain conditions, and when these conditions are…
Index numbers
Economists frequently use index numbers when making comparisons over time. An index starts in a given year, the base year, at an index number of 100. In subsequent years, percentage increases…
Marginal analysis
Economic decisions are taken in a marginal way, which means that decisions to produce, or consume, are made one at a time. For example, a typical consumer does not decide to drink…
