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Unit 2.8: Demerit goods / negative externalities

This page focuses on another cause of market failure, the negative spillover costs associated with the consumption of demerit goods and some of the policies that governments can use to reduce the negative spillover costs. While IB students will generally understand the concept of external costs they will often struggle with the appropriate diagrams.Why might the provision of some goods e.g. cigarettes and alcohol be...

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