1.3.3 Public goods Flashcards
Public goods
Public goods are missing from the free market, but they offer many benefits to society. They have two key characteristics:
● They are non-rivalry: one person’s use of the good doesn’t stop someone else from using it.
● They are also non-excludable: you cannot stop someone from accessing the good and someone cannot choose not to access the good.
Non-rivalry goods: public goods
One person’s use of the good doesn’t stop
someone else from using it
Non-excludable goods: public goods
You cannot stop someone from accessing the good and someone cannot choose not to access the good
Public goods example
Streetlights: you cannot prevent someone using the street light nor does their use prevent someone else seeing the light.
- There are very few examples of pure public goods, which are non-rivalry and non-excludable.
Quasi-public goods/ non-pure public goods
Quasi-public goods or non-pure public goods are goods which aren’t perfectly non-rivalry and non-excludable but aren’t perfectly rival or excludable.
- One example would be roads, which are , semi-excludable, as there could be tolls, and semi-rivalry as people don’t ‘use up’ the roads but congestion causes problems during rush hour.
- Private goods are rivalry and excludable: most goods are private goods.
Free rider problem
This says that you cannot charge an individual a price for the provision of a non-excludable good because someone else will gain the benefit from it without paying anything.
A free rider is someone who receives the benefits without paying for it.
Why public goods may not be provided by the private sector
Private sector producers will not provide public goods to people because they cannot be sure of making a profit, due to the non-excludability of public goods. Therefore, if the provision of public goods was left to the market mechanism, the market would fail and so they are provided by the government and financed through taxation.
