Lesson Plan

• Describe why demerit goods and goods with external costs are over‑consumed.
• Explain how over‑consumption creates deadweight loss and other social costs.
• Analyse government interventions (taxes, regulation, campaigns) that internalise externalities.
• Apply the social‑cost formula to evaluate market outcomes.
• Evaluate the long‑term implications of resource misallocation for future generations.

• Projector and screen
• Whiteboard and markers
• Printed handout of supply‑demand diagram (PMC vs SMC)
• Worksheet with case‑study questions on cigarettes and coal power
• Calculator for cost calculations
• Sticky notes for quick polls

Begin with a quick poll: “What products do you think harm the consumer or society?” Use the responses to link prior knowledge of price signals to the concept of hidden costs. Explain that today’s success criteria are to identify why markets fail and how policy can correct these failures.

1. Do‑now (5'): Students write examples of demerit goods and external‑cost goods on sticky notes; share briefly.
2. Mini‑lecture (10'): Define demerit goods, external costs, social cost; display the PMC/SMC diagram and formula.
3. Guided analysis (12'): Using the handout, calculate social cost for a selected good and highlight deadweight loss on the diagram.
4. Group activity (15'): Teams compare government interventions for cigarettes vs coal‑fired electricity, completing a comparison table.
5. Check for understanding (5'): Exit ticket – one sentence explaining why market price diverges from social cost.
6. Summary & homework (3'): Recap key points; assign a short research task on a local policy addressing a demerit good.

Summarise how over‑consumption leads to misallocation, deadweight loss, and broader societal impacts. Ask students to write an exit ticket stating one way policy can internalise an external cost. For homework, students will investigate a recent government measure targeting a demerit good in their community.