How do merit and demerit goods differ from public goods?

The first point to note is that public goods are not called public goods because they are provided by the public sector (i.e. the government). Although they do tend to be provided by the public sector, this is not the reason for the name!

All public goods have two important characteristics: Non-excludability and Non-diminishability.

Merit goods are also things that are 'good' for you, but unlike public goods they can be provided privately. The problem is that if they are provided solely by the private sector then they tend to be under-consumed, so, again, the government has to step in to correct the market failure

Merit goods are 'good' for you. Demerit goods are thought to be 'bad' for you. Examples are alcohol, cigarettes and various drugs.

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Merit Goods: Merit goods are products, such as education, which consumers may undervalue but which the government believes are ‘good’ for consumers as they exhibit positive externalities.  Merit goods would be therefore be under – provided in a pure free – market economy.  People do not take account of positive externalities when they decide how much to consume of a good so they may therefore under-consume the good

Demerit Goods: Demerit goods are goods which have negative externalities resulting from their consumption.  This means that consumption of the goods result in external costs – costs that fall on people other than those consuming the goods.  An example of demerit good is cigarettes.  Smoking causes additional health cost (external costs) that are paid by the rest of the population

Public Goods: Public goods are goods that would not be provided in a pure  free – market system.  This is because they display the characteristics of non-rivalry and non excitability.  Non- rivalry means that consumption by one person does not reduce the amount available for another (e.g. street lighting) and non-excitability means that once the goods is provided it is not possible to stop people benefiting from it (e.g. lighthouses

Pure public goods are ones that when consumed by one person can be consumed in equal amounts by the remainder of society, and where the possibility of excluding others from consumption is impossible