1.3.3 - Public Goods

Question 1

Describe Private Goods
(2 Points)

Answer 1

~ Goods which firms are able to provide to generate profits.

~ This is because they are excludable and rivalrous.

Question 2

Describe Pure Public Goods
(3 Points)

Answer 2

~ Are goods which are beneficial to society but will not be provided by private firms.

~ Due to the principles of them being non-excludable and non-rival.

~ E.g. Street lights, road signs, roads and beaches.

Question 3

Describe ‘Non-Excludability’ Of Pure Public Goods
(3 Points)

Answer 3

~ No price can be charged for a public good, that excludes others that haven’t been paid.

~ Benefits of consuming the good cannot be confined to the individual who has paid for the good.

~ There is no cost efficient way of paying. E.g. Maybe the good is too expensive.

Question 4

Describe ‘Non-Rival’ Of Pure Public Goods
(2 Points)

Answer 4

~ The quantity available of the good doesn’t diminish upon consumption.

~ If somebody consumes it, the quantity available remains exactly the same for everyone else.

Question 5

What Do The 2 Characteristics Of Pure Public Goods Lead To?

Answer 5

Free rider problem.

Question 6

Describe The Free Rider Problem
(5 Points)

Answer 6

~ Individuals have the incentive not to contribute anything at all, to the provision of the public good.

~ They will instead wait for other individuals to contribute and then free ride of their purchase.

~ Leading to no private motive to supply them, as eventually nobody will pay for the good.

~ Leading to a missing market, where there is complete market failure.

~ Which is why governments provide them through tax funding.

Question 7

Describe Quasi Public Goods
(4 Points)

Answer 7

~ Public good that sometimes shows the pure characteristics of a public good.

~ But sometimes shows the characteristics of a private good.

~ E.g. Road (Toll roads) and beaches.

~ This can provide a private incentive to supply the goods.