2)

a.

Positive externalities of consumption occur when the consumption of one good positively affects
another person who did not directly consume the good or service. This starts with individuals
who consume healthy food and are generally less likely to fall sick, reducing the need for
healthcare. This will take off the burden on health care systems and then in turn taxpayers.
Secondly, healthier people are more likely to be productive and greater productivity leads to
more economic output and societal benefits.

b.

Advertising by the government can be a useful tool to increase the consumption of merit goods,
but it may not always be the most appropriate or effective way to achieve this goal. Advertising
can raise awareness and educate the public about the benefits of consuming merit goods, such
as healthy foods, and encourage individuals to make more informed choices. For example, a
public health campaign promoting the benefits of a balanced diet and the risks of a poor diet
could increase the demand for healthy foods and lead to positive externalities of consumption.
On the other hand, there may be other factors that influence the consumption of merit goods
that cannot be addressed by advertising alone. For example, the availability and affordability of
healthy foods may be limited in certain areas, especially in low-income communities. In these
cases, government subsidies or incentives for healthy food producers may be more effective in
increasing the supply and accessibility of healthy foods.