Identify the category of good in which the solar-powered reverse-osmosis (RO) water plant fall? Also discuss the characteristics of this category of good.

The Case:

Pakistan has been hit by a deadly monsoon in recent memory. These floods cause large-scale damages, mainly in Sindh and Baluchistan. The people of Pakistan are in a pathetic state as there are unhygienic living circumstances. The country’s economy has already been suffering from many economic evils such as inflation, unemployment, BOP deficit, poverty etc and these all are jointly triggering the worst economic situation. In this regard, the Flood Recovery Programme was started by the United Nations Development Program in collaboration with the Economic Affairs Division of Pakistan to assist the communities impacted by the floods of 2022. Association for Water, Applied Education and Renewable Energy (AWARE) has installed solar-powered reverse-osmosis (RO) water plants to bring clean water to isolated communities and many such small projects have been initiated to mitigate the effect of floods.

Requirements:

By keeping in view the above scenario, identify the category of good in which the solar-powered reverse-osmosis (RO) water plant fall? Also discuss the characteristics of this category of good.

Solution:

The solar-powered reverse-osmosis (RO) water plant installed by the Association for Water, Applied Education and Renewable Energy (AWARE) falls under the category of "merit goods".

Characteristics of merit goods:

• Social benefit: Merit goods provide social benefits that individuals may not recognize or fully value, but society as a whole values.

• Undersupplied by the market: Market forces may not provide enough of the merit good to meet society's needs.

• Public provision or subsidies: Merit goods may require public provision or subsidies to ensure adequate supply.

• Non-excludable: Merit goods are often non-excludable, meaning they cannot be restricted to only those who pay for them.

In the case of the solar-powered RO water plant, clean water is a social benefit that is important for the health and well-being of the community, but the market may not provide enough access to it. The public provision of the water plant through the Flood Recovery Programme and the support of organizations like AWARE help ensure adequate supply and access to clean water for the affected communities.