1.3.3 Public goods

Question 1

What are public goods

Answer 1

Public goods are those which are non rivalrous and non excludable and cause market failure due to missing markets. Non rivalrous meaning the consumption mabe by one person doesnt stop others from using it. Non excludable meaning there is no effiecient way of pricing the service/good.

Question 2

What are private goods

Answer 2

These are both rivalrous and excludable as the consumption of one good means that that good is no longer available for others (rivalrous) and if consumers are not willing and able to buy a product then they’re excluded form the enjoyability gained from the consumption of the product.

Question 3

Why do private sector firms not supply public goods?

Answer 3

This is due to the free rider problem where individuals can free ride and benefit of off others consuming the good/service. As a result private firms would be unable to supply them for a profit.

Question 4

What does the free rider problem lead to

Answer 4

As private firms are unwilling to supply public goods it leads to under provision and so the government interevne and provide them to try correct the market failure.