1.6 Classification Of Goods And Servces Flashcards
Definition of free goods
Free goods have
- zero to no opportunity cost
- gift of nature
- no prices
Private goods
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
Public goods
- Non excludable
- the benefits of the good cannot be only limited to only those who have paid for it - Non rival
Exp: street light, lighthouse , fire protection
Quasi public goods
- Semi non rival
- beaches, parks - Semi non excludable
-building toll booths and fencing a park and charging an entance fee
Merit goods and information failure
Merit goods are private goods that is thought to be desirable but which is under consumed and under provided by the market
Demerit goods and information failure
Demerit goods are private goods that are thought to be undesirable and which is over consumed and over provided by the market
A)Why government may be required to provide merit goods
B) Essay Evaluation
Why such intervention may not always be successful
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.