De-merit goods are those goods or services that create negative
externalities when the product is consumed. This reduces the social marginal
benefit of consumption and also leads to potential market failure through
normally chooses to tax those products that generate negative consumption
· Cigarettes .
Or it may choose
some form of regulation as an alternative strategy, e.g.:
Finally it may
choose to ban the good or service all together, e.g.:
· Drugs .