Using examples, explain the difference between merit goods and public goods and show
why it is possible for profit to be made in the supply of one of these types of good but not
the other.(8)
参考 essay:
Merit goods are socially desirable private goods that generate social benefits or positive
externalities upon consumption. Due to imperfect information, the full benefits of merit
goods such as education and healthcare are usually underestimated. Public goods
meanwhile refer
to goods that are commonly available and collectively consumed by society such as national
defence.(解释 merit goods 和 public goods)
Both types of goods can be distinguished by a few characteristics. As private goods, merit
goods are rival and excludable in nature. (描述两种商品的不同特点)
Rival means the consumption of a good by a person reduces the amount available for
others. An example of this characteristic is the limited number of chairs in a public library.
When a person occupies a chair in a 100-seat public library, the number of available seats
left for others will be 99.(对于 rival 的举例,大家可以考虑具有人数限制或者场所大小限制的
特点)
Excludable means a person can be excluded from consuming a good if the person does not
pay for it. For example, a person can be denied from staying in a rented property if the
person does not pay the rent.(对于 excludable 的举例,大家可以考虑收费才能享用的特点)
In contrast to merit goods, public goods are non-rival and non-excludable in nature.(注意衔
接,合适引出你们要讨论的话题)
Non-rival means the consumption of a good by a person does not reduce the amount
available for others. For example, if a person turns on the radio and turn into a channel, the
radio broadcast signal received will not reduce the reception of other listeners.(无线电广播
没有人数限制)
Non-excludable means that once a good is provided, the benefits derived from the
consumption of the good cannot be limited to only those who have paid for it. An example
of a good that possesses this characteristic is a streetlight. Once a streetlight is installed on a
public street, everybody using the street at night can benefit from the light. Therefore, a
person cannot be excluded from enjoying the good despite not bearing any financial cost
for its provision.(路灯你不需要付费也能享用)
--------------至此,and 之前的第一个问题结束,下面开始 and 之后的问题-------------Between merit goods and public goods, profit can only be made in the supply of merit
goods. This is because the rival and excludable characteristics of merit goods make it
possible for producers to charge a price for the consumption of the goods. Private hospitals
and private
schools, for example, charge very steep prices for their services. Although merit goods are
usually under-produced, producers can still make the profit in the supply of the goods.(解释
为什么 merit goods 可以实现 profit,因为他们是 private good,具有 rival 和 excludable,所以可
以定价的, 尽管是 underproduced 但依然不影响他们 make profit)
In contrast, the supply of public goods will not be profitable to producers. This is due to the
free-rider problem, whereby non-payers are still able to enjoy the benefits of public goods
despite not paying for them. Non-payers or 'free riders' will wait for somebody else to pay
for them to use the goods for free. As a result, public goods will not have a market and there
will be no producer to profit from the supply at all.(不要忘记说 public goods 为什么不能
make profit, 因为 non-rival 和 non-excludable 带来的 free-rider 问题,没法 set price)
To conclude, merit goods are socially desirable goods that are rival and excludable, while
public goods are goods that are non-rival and non-excludable. It is possible for profit to be
made in the supply of merit goods because merit goods that are rival and excludable in
nature have to be bought for consumption. The supply of public goods, however, cannot be
profitable because producers cannot charge a price on public goods that are non-rival and
non-excludable in nature.(结尾再次总结一下两个产品的不同属性以及能够带来 profit 的不
同陈述)
Discuss why merit goods are undersupplied in a free market economy and consider the
effectiveness of one policy to deal with this problem.(12)
参考 essay:
A free market economy is an economic system where goods are produced and consumed
with little to no government intervention. If left to the forces of the free market, the supply of
merit goods such as insurance, education and healthcare will be undersupplied. The reason
for the undersupply is the existence of imperfect information. Imperfect information arises
when parties to a transaction do not have the same amount of information about a
particular good. In the case of merit goods, consumers do have not a full understanding of
all the benefits of consuming merit goods. Thus, merit goods are not demanded and
consumed at an optimal level.(解释 free market, 解释 merit goods 为什么 underproduced)
One policy that can deal with the undersupply of merit goods is direct provision. Direct
provision means the supply of goods and services deemed socially beneficial is controlled by
the government. Some examples of directly provided goods and services include public
schools, public hospitals, national museums and public parks. The government can therefore
provide sufficient merit goods.
Direct provision, however, has a few disadvantages such as cost inefficiency and elimination
of competition. The government or public entities can be cost inefficient as they are less
concerned about keeping costs to a minimum. This is because unlike private firms that
maximise profit by minimising costs, the operation of public entities is not driven by profit.
As a result, public entities may be cost inefficient in the supply of merit goods and even
create waste.(说不足)
Direct provision can also lead to a monopoly and elimination of competition. Competition
is important as it drives innovation, improves services and makes firms more responsive to
consumer demand. With direct provision, however, there will be no competition as the
supply
of merit goods is only left to public entities. As a result, the quality and innovation of merit
goods can be compromised.(但也是有好处的)
Despite these disadvantages, direct provision can help confer positive externalities on the
society as a whole. For example, the direct provision of public education can help improve
access to education. Better access to education can in turn build knowledge, literacy and
capabilities for individuals to participate and succeed in society.
Moreover, direct provision has the advantage of increasing the quantity of merit goods in
the market. This is because the supply of merit goods through direct provision will not be
dictated by the demand and supply forces of the free market economy. As a result, the
consumption of merit goods will be higher and the benefits of consumption will be
maximised. (尽管有不足,但是还是可以某种程度上是好的)
In conclusion, direct provision is one policy that can deal with the undersupply of merit
goods. Other government interventions may include regulations and subsidised provision.
Regardless, direct provision may be the most suitable policy for the supply of essential
services such as education and healthcare since they are crucial to the welfare of society.