1.3.3 Public And Private Goods Flashcards
What are pure public goods?
Public goods are goods that are non excludable and non rival.
What is non-excludable good and non rival good and list their respective examples?
A non excludable good is a good where no price can be charged and that the benefits of consuming that good aren’t confined to the individual that has payed.
Examples: beach
A non rival good is a good that is consumed but the quantity of it remains the same and doesn’t not diminish
Examples: street lights
What is a private good?
A private good is when a good is excludable and has rivalry
What is an excludable good and a good with rivalry and give respective examples?
An excludable good is a private good that sellers can exclude those from consuming the product who are not willing and able to pay or it.
Sellers can make profit of it and exercise property rights
A rivalry good is good that when consumed it reduces the amount left for others to consume and benefit from
This occurs when scarce resources are used to make good/service
Examples: plane ticket
What is the free rider problem?
What happens if everyone does it
Refers to the tendency for individual to benefit from a public good/service without paying for it and contributing to cost of it.
Happens when a good is non excludable
If everyone free rides market failure occur as there will be a missing market
Examples of free rider problem and how it can be solved?
People who watch sports coverage without paying for it
Ways to solve the free rider problem
Government can provide the public goods and pay for them through taxes
Legislation can be imposed
Private provision with exclusion as private firms can provide public goods and exclude people though not all public goods can be excluded
What is a quasi public good and give and explain example?
A quasi public good is a public good that has characteristics of both public and private.
An example would be roads
Roads are non-excludable at a point as tolls would make it excludable.
And if roads are used in peak times it becomes rival as there is less space road space
