1.6 Classification Of Goods And Servces

Question 1

Definition of free goods

Answer 1

Free goods have
- zero to no opportunity cost
- gift of nature
- no prices

Question 2

Private goods

Answer 2

These goods are limited in supply and have opportunity cost since the resources used to produce these goods are limited

1) Excludability
- it is possible to exclude someone from using it if the person does not pay for it

2) Rivalry
- consumption by one person reduces the quantity of this goods for others

Question 3

Public goods

Answer 3

1. Non excludable
   - the benefits of the good cannot be only limited to only those who have paid for it
2. Non rival

Exp: street light, lighthouse , fire protection

Question 4

Quasi public goods

Answer 4

1. Semi non rival
   - beaches, parks
2. Semi non excludable
   -building toll booths and fencing a park and charging an entance fee

Question 5

Merit goods and information failure

Answer 5

Merit goods are private goods that is thought to be desirable but which is under consumed and under provided by the market

Question 6

Demerit goods and information failure

Answer 6

Demerit goods are private goods that are thought to be undesirable and which is over consumed and over provided by the market