Discuss whether it is better to introduce an indirect tax or to adopt policies to improve consumers’ knowledge and understand to deal with the problem of demerit goods. 
The term demerit good refers to goods that inflict negative effects on the user upon their consumption. Moreover, these negative effects are under evaluated by consumers, usually due to asymmetric information. Thus, consumers are unable to fully incorporate these negative effects into their willingness to purchase a certain good, hence, the demand for the good, representing the consumer’s willingness and ability to purchase a good at every level of price, is higher than it should be for demerit goods. This leads to the incentive for producers to produce these goods to also be higher than it should be, in turn causing the good to be both overproduced and overconsumed in the economy.
An indirect tax will cause the supply curve to shift to the left, leading to a fall in the quantity supplied at every level of price. This will in turn cause a new equilibrium point to be formed with a lower quantity consumed and a higher price. Thus, such a measure can help curb the consumption of harmful demerit goods by integrating the cost to the consumer into the cost of the product itself. Beyond the benefit of lower consumption, the indirect will help increase tax receipts for the government which will then allow for more beneficial big government projects that will benefit the population of the country and the economy as a whole. Furthermore, the increase in price will incentivise consumption of substitutes and other alternatives to the demerit good, thus it can lead to an overall increase in the consumption and demand for other goods and services, provided that the price elasticity of demand for the demerit good is greater than 1.