Public Goods (1.3.3) Flashcards
What are Public Goods?
Missing from the free market, but they offer many benefits to society. Goods that are provided for free by government.They are Non-Excludable and Non-Rivalrous.
What are some examples of Public Goods?
Commodities in an economy like street lights, Education, Healthcare, Beaches or Public Parks.
Why do Firms not provide Public Goods?
This is because it doesn’t make a firm any money and they wont make profit so they go down the route of private goods.
What are Private Goods?
Goods that are Provided by firms for Profit. is a product that must be purchased to be consumed, and consumption by one individual prevents another individual from consuming it. They are Excludable and Rivalrous.
What is the benefit of public goods being in state provision?
Quality of life is much better with public goods in and private firms have no incentive to pay for them so someone has to.
What is the difference between a public and a private good?
A public good is Non-excludable and Non-rivalrous.
A private good is excludable and rivalrous
What is the Free Rider problem?
Type of Market Failure that occurs when people benefit from resources they they don’t pay for or under-pay. This is a situation where customers realise that they can still access the goods, even without paying for them. They are continuing to enjoy the benefits and ‘free-riding’ on the backs of other paying customers. This reduces the incentive to provide the good or service and leads to an inefficient allocation of resources. Can be solved by tax regulation or social norms.
What does Excludability mean?
When you buy something you are excluding other people from buying it and consuming it.
What does Rivalrous mean?
The act of consuming something uses up the good and then is considered rivalrous. When a consumer reduces the ability for someone else to consume that certain good.
What are Quasi Public goods?
Public goods that are provided free of charge and everyone can use them. They can be used up and so then it excludes some consumers from using them. e.g. sun loungers on a beach as there are only a certain amount cost-free that can be used.
What does Utility mean?
Refers to the level of satisfaction gained from consuming a good or service. Rational person will consumer goods and services that maximize their utility.
What does Maximizing Utility mean?
If you are a rational person you will consume goods and services that maximize your utility. However, you may not have all the info you need to truly understand which goods or services will maximize it.
What’s a Quality Mark?
Standard or Criteria met by industry or government. Logo on a product or on the description of a service. Shows that it meets their standards.
What does Positive Consumption look like on a graph? (shift?)
Positive Consumption (MPB) shifts MPB to the right. (MPC equals to MSC) under-consumed and underpriced
What does Negative Consumption look like on a graph? (shift?)
Negative Consumption (MPB) shifts MPB to the left.(MPC equals to MSC) over-priced and over-consumed
