what are merit goods

Merit goods are goods or services that are considered beneficial for both the individual and society, but are often under-consumed in a free market. Common examples are education and healthcare, because they create wider social benefits beyond the person using them.

Quick definition

A merit good is something people may not fully value or choose enough of on their own, even though it helps them and others. Economists say these goods often create positive external effects, so the market may provide too little of them.

Why they matter

• They improve long-term wellbeing.
• They can reduce social problems later.
• They are often subsidized or provided by government to increase use.

Examples

• Education.
• Healthcare.
• Vaccinations.

Simple way to remember

If a good makes both you and society better off, but people still tend to buy too little of it, it is likely a merit good.

TL;DR: Merit goods are beneficial goods the market tends to under-consume, so governments often step in to encourage more use.