Ace the A Level Economics AQA Exam 2025 – Power Up and Conquer the Market!

The correct interpretation is that luxury cars would not be considered a merit good. Merit goods are those that are deemed beneficial for individuals and society, often underprovided and under-consumed when left to the free market. They provide positive externalities and are typically funded or subsidized by the government to encourage consumption.

Public libraries, education, and healthcare all fit the characteristics of merit goods. They are essential for individuals' well-being and contribute significantly to societal benefits, such as increased literacy, better health outcomes, and overall social welfare. These services are often seen as necessary for a functioning society, warranting government intervention to ensure accessibility.

In contrast, luxury cars do not fall into this category, as they offer personal benefits primarily based on individual preference and purchasing power, rather than generating widespread societal benefits. While they may enhance the quality of life for individuals who can afford them, luxury cars do not provide the same universal advantages as education or healthcare, and their provision is best left to the market.