1.3.3 Public Goods

Question 1

What are missing markets?

Answer 1

Missing Markets are markets that aren’t available in the free market economy because they aren’t profitable due to the free rider problem.

Question 2

Define and give examples of public goods

Answer 2

Public goods are a commodity or a service that are made available for everyone to use. i.e street lamps

Question 3

What are the characteristics of public goods

Answer 3

— Non-excludable means it is costly or impossible for one user to exclude other users from using a good.
— Non-rivalry means that when one person uses a good it does not prevent others from using the good.

Question 4

What is the difference between a merit good and a public good?

Answer 4

A merit good has positive externalities and a public good is non rivalry and non excludable. Both are often provided by the government but merit goods are under produced and under consumed whereas public goods aren’t provided.