1.6 Classification Of Goods And Servces Flashcards

1
Q

Definition of free goods

A

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

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2
Q

Private goods

A

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

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3
Q

Public goods

A
  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

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4
Q

Quasi public goods

A
  1. Semi non rival
    - beaches, parks
  2. Semi non excludable
    -building toll booths and fencing a park and charging an entance fee
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5
Q

Merit goods and information failure

A

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

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6
Q

Demerit goods and information failure

A

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

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7
Q

A)Why government may be required to provide merit goods

B) Essay Evaluation
Why such intervention may not always be successful

A

A)
-private sector not willing to fully provide
- problem of payment for merit goods
-benefits in terms of society and economy

B)
- Government may lack resources to provide sufficient merit goods
- Government may not have enough information on which exit goods should be provided.

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