Economics for Business: Public, Private, Merit Goods and Policies

This report, prepared for an Economics for Business course, examines the concepts of public, private, merit, and demerit goods within the context of the UK economy. It begins by defining public and private goods, discussing their roles, and the challenges the UK government faces in providing access, particularly concerning the free-rider problem. The report then introduces quasi-public goods and analyzes the balance between public and private goods. Task 2 focuses on merit and demerit goods, explaining their characteristics and providing examples. It explores government policies and strategies to increase the consumption of merit goods, such as voucher systems and the NHS, while also addressing measures to curb the consumption of demerit goods. The report concludes by summarizing the key findings and implications of these economic concepts and policies.

ECONOMICS FOR
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK-1............................................................................................................................................3
Q.1................................................................................................................................................3
Q.2................................................................................................................................................5
TASK-2............................................................................................................................................6
Q.1................................................................................................................................................6
Q.2................................................................................................................................................7
Q.3................................................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Demand and supply are two important aspects with respect to economics and economy.
Public goods are those that bring benefits to all however private goods are just opposite and is
totally related with the market and its situations. Enabling access to public goods and
maintaining access with respect to private goods is all related with the government policies and
intervention. However, balance of these two goods are essential. Likewise, merit goods puts
positive impact towards the society which are need to be raised in terms of supply and demand.
This report will discuss the concept of public and private goods along with an explanation of
requirement and balance of these goods in the economy. Likewise, concept of merit and demerit
goods along with government policies and programmes with respect to raising supply and
demand of merit goods will also be included in this report.
TASK-1
Q.1
Public goods:
Public goods are those goods that benefits many other people without consideration
towards payment concept and also its benefit never depends upon other. This means that there is
no consideration that there will be dependency of benefits of one person towards another. Public
goods can't be efficiently supplied by market. It is made available for all the member of the
society (FERNANDO, 2020).
Private goods:
Private goods are those goods whose ownership is related and restricted to the actual
owner. This means that these goods are someone's personal goods and own by that individual
only.
With respect to UK economy there is a requirement of both the public and private goods
because as the public goods are non-excludable and nonrival which make it important for UK
economy to carry on its supply in market (Paolo, 2018). This is also because of cost benefit
analysis wherein cost and social benefits are determined and supply of public goods are carried
on. However, in case of private goods which are excludable and rival which itself make it
necessary for the UK government to run its supply because it is the lead to market. It is also to be
noted that when the goods will be non-excludable then free rider problem in terms of non

payment to producers will arise and as a result the production will be affected. However, in case
if minimum cost will try to be paid to producers then consumption will decline. Thus, private
goods enable the balance in the market and run the economy of the UK along with its supply.
These goods also create certain level of competition which will itself create the market and the
economy will be able to run.
UK government failed to access private goods when marginal social benefits equal to
zero. This means that the benefits that arise out of production and consumption of goods with
respect to environment is zero. As if the government will not make inter-vision then it will lead
to have an increase in the pollution level and the private goods production will continuously raise
this percentage. Thus, when it sees that the level of pollution raised at extensive state around
1960 and 1970 then, environmental standards come into force. Clean Air Act, 1970 is such an
example of it (Krugman & Wells, 2020). Likewise, imposition of emission tax with respect to
pollution emission and environmental affection is also an example by which government make
restriction with respect to private goods. Pigouvian taxes are also a set example that was imposed
by government of UK with respect to marginal benefits and cost concept and thereby again
related with the production of private goods.
Quasi-public goods:
These are those goods that have characteristics of both the public and private goods
(Quasi-public goods – definition., 2021). This means that they possess partial rivalry,
excludability, rejectibility. These goods have capacity and characteristics of both the public as
well as private goods.
As public goods are non rival and non- excludable which make it important for the
consumer to have consumption without making payment for it. (Pettinger, 2019) It is to be noted
that as these involves greater percentage of social benefits in comparison of cost so its
production and distribution is supported by government too. As it does not involve payment of
money by the consumers so it will lead to dissatisfaction among the producers but it doesn't
mean that its importance will decline. As in order to make the entire city clean there is need of
public sewage system. Although personal payment is not included in this but its benefit will
make the entire city healthy. Same in the case of public goods too, its benefits in terms of
societal advantage are too high that will lead it an encouragement in its production. Although
private goods run the market and make the market but the satisfaction of needs of few

individuals will not be enough in comparison of the general public. Thus, public goods are being
supported by the UK government. Along with government its distribution is further supported by
self-interested individual, voluntary contribution and various other too.
In addition, of this it is also to be noted that the UK government also need to focus
towards the cost benefit analysis that will act as base for taking decision regarding the support of
public goods. As these goods are also related with the disease prevention, national defence,
scientific research so its benefits are quite high in comparison of private goods with respect to
country. For this reason also government of UK support public goods.
Q.2
The UK government face difficulty with reference to providing access to public goods
when the free-rider problem raised. This means that in order to grab the goods people started free
riding and think that as the goods are available for free of cost so it would be easy to them
regarding access (Free Rider Problem, 2020). And when government in order to support the
producers start lying some cost the it will directly impacts the consumption percentage. This
means that with the imposition of prices and costing the consumption of the public goods
decline. This is the phase when the government of the UK face difficulty to access the public
goods. As it is a fact that when the people will get the free access to the public goods then it will
not only have an impact over the market but the producers will also be affected. Hence, this is
the situation when government face difficulty.
UK social welfare programme has adequately delivered the fair access to public goods.
This can be understood as free and fair access with respect to public goods including goods used
for scientific research, defence or for disease prevention. Along with the UK government. As the
government policy based on the concept of marginal cost and benefit analysis, so with the
inculcation of this concept the UK government has justified the access to public goods. This can
also be understood with a current example of Covid pandemic wherein the UK government
policy and programme enable access to public and private goods too. As under this pandemic
situation when there is a greater need of the public or life saving goods the government has made
full support to it. Likewise, private goods in terms of those which are rivals are also supported by
the government in order to run the market and the economy. This has make the smooth
functioning of market in terms of benefiting the economy along with ensuring benefits to people

with respect to consumption of public goods. This can also be understood with the sewage or
police service, transports, roads, dams and various other examples of public goods that are being
enabled access and support of the UK government policy and programmes. Likewise, setting up
of policy with respect to taxes, emission taxes, pollution standards it again makes support of the
private goods that may include the manufacturing of the clothes, cars, food and various other
private goods. Thus, it can be right to said that with efficient polices and programmes, UK
government make support of both the goods and enable societal along with economic benefit to
country.
TASK-2
Q.1
Merit goods:
These goods are those which are under produced and under consumed with regard to free
market. These goods can be provided with the help of market but it is not necessary that they
raise the social welfare. For example: health care, education, housing, welfare services, public
parks, protection and various others. These goods are provided in free market but with
insufficient quantity (Pettinger, 2017).
Demerit goods:
These includes those goods whose consumption will put negative impact towards the
consumers. In other words, consumption of these goods are unhealthy, degrading or socially
undesirable (Demerit good – definition, 2021). For example: alcohol, cigarettes, drugs and
various others.
In addition of this with respect to merit goods in terms of health care, or welfare services
or protection services that are enabled by the government may have a positive impact towards
the health or the life of the people. As this can be understood with an example of covid pandemic
wherein merit goods in terms of heath care and protection is provided by UK government have
put a positive impact over the society in terms of fighting from pandemic.
However, this can be contrasted with the example of demerit goods wherein government
make ban over the consumption of goods that are related with smoking, drinking, drug abuse and
various others. These are being banned and restricted with the purpose of ensuring healthy life
among people and reducing the negative and adverse impact towards health.

It can also be understood with the example of UK and its policies in which it make
provision with the imposition of restriction with respect to demerit goods and ensure the
consumption and raise advantage of merit goods. With the enabling of education, public parks,
fire protection government of UK is enabling merit goods among people and leading them
advantages of it. These goods as a result are being initiated with the purpose of enabling societal
benefits and advantages.
Q.2
As merit goods are used and determined as those goods which may bring benefit to
people so in order to raise its consumption government of UK has made various policies and
strategies with regard to increased consumption of merit goods. This can be well justified with
voucher system that is being associated with education merit goods. Under this system voucher
is allowed by the government of UK to the parents by which they can make combination of their
finance with voucher in terms of benefit may avail education as merit good for their children.
This is like quasi goods because it will lead to have an inculcation of both the private and public
good features. However, enabling price free goods in would also be termed as merit good but as
it does not include the price element so it will lead to have an overriding demand. And as a
result, production become difficult so quasi good concept was launched by government in order
to enable merit goods with certain price element. Government working and intervention with the
concept of NHS is also a move that enable education to children in UK and as a result merit
goods are delivered among masses. Enabling pension scheme is also counted as a good move of
government towards enabling merit goods to people. As this include the concept of individual
income involvement so enabling pension among the individual is a good example of merit goods.
Making of provisions and enabling health care services at free of cost is also an example and
move of government towards the concept of enabling merit goods.
However, with regard to demerit goods which are harmful with respect to its
consumption government also include various moves and made various policies so that the
demand curve of demerit goods would come to left. As demerit goods carry negative
externalities like if a person smokes then it will affect that person itself (Pettinger, 2019).
Negative advertisement is one of the campaign of the government with respect to demerit goods.
Under this campaign negative advertisement in terms of harmful impact of consumption of

alcohol and various other demerit goods are shown. Imposition of heavy taxes is also a move of
government with respect to reduction of the consumption of the demerit goods. With the
imposition of heavy duties the consumption of the demerit goods like liquor, cigarettes are tried
to be reduced. Imposition of legislation like Prohibition law of USA, 1930 and various other are
also engaged so that the consumption of demerit goods will be mitigated and reduced.
Thus, it would be right to said that the government plays an important role with regard to
the raising consumption of merit goods and reducing the consumption of demerit goods.
Q.3
It would be wrong to said that there is no inter-vision of government with respect to merit
goods. In-fact UK government take many initiatives and steps with respect to merit goods and its
consumption. With reference to these goods government feel that people will under-consume or
it need to be provided at free of cost (Explaining Merit Goods, 2021). This can be understood
and supported with may provisions and policies of the government with respect to the merit
goods. As the government of UK operate its services and programmes with respect to merit
goods through various agencies including NHS or through other programmes too. UK's
government also enable the free training to doctors, nurses, teachers in order to make
contribution towards the merit good of education and healthcare. Likewise, government also
enable funds to the private hospitals and private schools so that number of beds and sets will be
raised and better healthcare and education will be enabled by the people as a merit goods.
However, it is also to be noted that the major issue which the government face with respect to the
pricing policy. This decision is related with enabling of merit goods for free of cost or to make
charges of it. As if the goods will be enabled at free cost then it will lead to overconsumption.
Thus, an involvement of quasi goods was inculcated so that better rendering of merit goods will
be possible.
As there are two options with respect to goods that either its supply will be increased with
an increase in demand. Thus, in order to raise the supply of the merit goods government of UK
integrated various grants and subsidies with respect to its production. This can further be
understood as integration of tax benefits, enabling grant for the production of merit goods and
many more are included in this. However, these subsidies and grants are financed by the taxes
which are borne by the local people (Merit goods, 2021). This strategy of government has raised

the supply of merit goods of healthcare, education and various other. Likewise, some other
public goods including the roads, bridges, airports are also maintained by the government with
the involvement of tax revenue.
Likewise, demand is also raised by the government with respect to merit goods with the
involvement of reduced prices in tuition fees of universities, so that education will be promoted.
Enabling free treatment of contagious diseases in hospitals, use of public awareness campaign so
that better publication and demand of merit goods can be raised.
Thus, with such policies and programmes government address fair provision with respect
to merit goods.
CONCLUSION
From the above report it can be concluded that there should be a balance between the
supply and regularization of public as well as private goods so that societal benefits along with
economic balance can be established. This need has given rise to quasi goods that possess the
characteristics of both the goods. Likewise, making of provisions with respect to increase in
supply of merit and decrease in consumption of demerit goods is also understood with regard to
this report.

REFERENCES
Books and journals
Krugman, P. & Wells, R., 2020. Essentials of Economics, 5th ed. New York: Worth Publishers.
Pp. 285-314.
Paolo, R., 2018. Public Goods beyond Markets. Routledge. 30.
Online references
Demerit good – definition., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/Definitions/Demerit_good.html >
Explaining Merit Goods., 2021. [Online]. Available through
<https://www.tutor2u.net/economics/reference/merit-goods >
FERNANDO, J., 2020. Public Goods. [Online]. Available through
<https://www.investopedia.com/terms/p/public-good.asp>
Free Rider Problem., 2020. [Online]. Available through
<https://www.investopedia.com/terms/f/free_rider_problem.asp >
Merit goods., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/Market_failures/Merit_goods.html >
Pettinger, T., 2017. Private, Public and Free Goods defined. [Online]. Available through
<https://www.economicshelp.org/blog/2104/economics/private-public-and-free-goods-
defined/>
Pettinger, T., 2019. Definition of Public Goods. [Online]. Available through
<https://www.economicshelp.org/micro-economic-essays/marketfailure/public-goods/>
Pettinger, T., 2019. Merit and Demerit Goods. [Online]. Available through
<https://www.economicshelp.org/micro-economic-essays/marketfailure/merit-demerit-
goods/#more-3472>
Quasi-public goods – definition., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/definitions/quasi_public_good.html >
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