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Just need some clarification on an issue im having. Correct me if im wrong, but in the overconsumption of a demerit, consumers consume at S=D as their marginal personal benefit = to their marginal personal cost? (the same way firms output at MC = MR).Am I right in saying this? Ik consumers only consider personal costs and benefits and therefore i made the assumption that this is the reason they consume at the point where MPC = MPB however i cant find anything that supports this.
Thanks.
In standard consumer choice models you are correct. A person will consume good up to the point where marginal private costs of consumption equal marginal private benefit of the consumption. It is surprising you cannot find any source supporting that since any 101 textbook mentions it. For example, Mankiw's Principles of Economics state that literally at the page 6.
However, it is worth while mentioning that in some classes of models and in real life you could have some more complex dynamics where this does not hold. For example, person could suffer from some behavioral bias like hyperbolic discounting, and in that case, depending on parameters of the model, MPC=MPC could be violated.
