Merit Goods

Tom has asked for some guidance. See comments on the essential revision post.

Here is a good posting from tutor2u and here is some handout I found on the web, which is worth a quick look.

Essentially merit goods tend to be under-consumed and the govt could adopt a policy of encouraging people to consume them. Last year there was a bit of a campaign to try to reduce VAT on sports goods. The argument was that bringing the price down would encourage consumers to buy the sports equipment and lead healthier lifestyles.