Demerit Good Law and Legal Definition

A Demerit Good is a good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves. Consumers in normal market exchanges overvalue them. As such, governments typically restrict the consumption of demerit goods through policies such as taxes or direct government control. Demerit goods often have characteristics of quasi-public goods or externality by-products. Examples include tobacco and narcotic drugs. The counter type of demerit good is a merit good.