2.10 PUBLIC GOODS Flashcards
what is a public good
a good or service that is provided , without profit, to all members of a society, either by governments or by a private individual / organisation
what are public goods also known as
collective consumption goods
whats a quasi public good
these are gods which have an element of non-excludabilty and non-diminishable
what are the 4 characteristics of public goods
non - diminishable
non - excludability
zero - margin cost
non - rejectable
what does it mean by non - diminishable
this means that when a good is consumed, it doesn’t reduce the amount available for others (eg. benefitting from a street light doesn’t reduce the light available for others)
what does it mean by non - excludability
this occurs when it is not possible to provide a good without it being possible for others to enjoy (eg. building a flood defence system to stop flooding protects everyone in the area not just you)
what does it mean by zero marginal cost
this means that the cost of supplying an extra unit to the next consumer is zero once the good is provided (eg. once a flood defence system is in place it has zero marginal costs to supply an extra customer)
what does it mean by non - rejectable
the good supplied cannot be rejected (eg. flood defences and national defences)
examples of public goods
- national defence
- street lighting
- police service
- the Internet
whats an example of a quasi public good
roads. once provided most people can use them for example those with driving licences. however, when you use the road the amount others can benefit from is recused to some extent because there is increased congestion
what is the free rider problem
individuals have an incentive to use the good without contributing to the cost (anyone who benefits from a public good but doesn’t pay for it)
