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Merit and Non Merit Goods: Meaning, differences and Examples

Hemant Singh

Definition of Merit Goods;

Merit goods are also known as the superior goods. Merit goods and services are those goods which are promoted by the government. The government wants to increase the consumption of these goods to increase the welfare of the society. If these goods & services are costly then government gives subsidy to promote consumption or sometimes provides free of cost to the poor.

Properties of Merit Goods;

1. Merit items are not served on the basis of consumer’s preference, but on the basis of government's preference. Hence government don’t ask people to provide the merit goods.

2. Merit goods are arranged by the government for a particular class of society, whereas social goods are arranged for all sections of the society.

3. Merit goods directly benefit their receivers and create social benefits as well. Construction of schools builds a literate society which creates a better country.

4. Merit goods releases positive externalities. Like subsidised food and free home to poor reduces the incidents of the crime in the country.

5. Merit goods can be personal goods.

Examples of Merit Goods;

1. Providing free home to poor (Pradhanmnatri Aawas Yojna)

2. Proving subsidised food to poor ( Antyodaya Ann Yojna which provides wheat, rice at cheap rate to poor)

3. Medicines given in government hospitals and nutritional food given to children at the Agnavadi centers

4. Public Library, Public parks etc.

5.  Hospitals and school

Definition of Non Merit Goods;

Government bans the goods and services which are seem to be harmful for the society. So such goods are called non-merit goods. Government wants to check the use of such goods and services for the welfare of the society.

Properties of Non-Merit Goods;

1. These goods have negative externalities because they affect others without compensating them. A smoker not only affects his/her health but also peoples standing surroundings him/her.

2.  Generally these goods are too costly. Government imposes higher taxes on non-merit goods to curb the consumption of these goods. You must have observed that government imposes very high rate of taxes on the cigarettes, liquor and other intoxicating items every year.

3. These goods can also be private.

Examples of Non-Merit Goods;

1. Liquor, high caffeine energy drinks, Drugs, Opium and cigarettes

2. Violence promoting movies and games like the government banned the PUBG and blue whale games.

3.  Hands free mobile phones in vehicles

4. High fat, salt and sugar containing foods (Government has banned the sale of pizza, burger, pastries and other fat oriented foods)

So the awareness about the merit and non merit goods is very important not only for the general public but also for aspirants of different competitive exams because many times interview board has asked the questions related to the difference between these two types of goods.

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