Definition
- Demerit good
- A demerit good is a good that a free market over-consumes, because buyers underestimate its harm to themselves or ignore its cost to others.
- Not to be confused with: Merit good
- A merit good is a good that a free market under-consumes, because buyers underestimate its benefit to themselves or ignore its benefit to others.
Test yourself
What is the difference between demerit good and merit good?
A merit good is under-consumed by a free market; a demerit good is over-consumed.