The example I was given for each was cigarettes.

  1. What market may have negative consumer externalities but is not a market for a demerit good?

  2. What is a type of demerit good that may not have a negative consumer externality?


1 Answer 1


Demerit goods are goods where it is agreed by society that consumption is harmful for the consumer yet it is still consumed due to bounded rationality or because you disagree with society while negative consumer externalities occur when actions of a consumer is harmful for society.

Goods that are demerit but may not have negative consumer externality:

Any type of unhealthy food. E.g. cinnabuns.

Carcinogenic stuff, alcohol, etc.

Basically anything you regret having consumed a few hours later.

If consumption of these goods do not harm society, then there are no negative externalities, as long as no one else cares about the consumer :'(

Good that may have negative consumer externality but may not be a demerit good:

Loud music

  • $\begingroup$ Thanks denesp. What about goods whose markets may have negative consumer externalities but aren't demerit goods? $\endgroup$
    – BCLC
    Commented Aug 6, 2016 at 6:58
  • $\begingroup$ I'm gonna edit your answer and see how community responds. Thanks! ^-^ $\endgroup$
    – BCLC
    Commented Aug 10, 2016 at 12:09

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