2.10 - Public Goods incomplete Flashcards
Explain what is meant by the term Public Good
Public goods are non-excludable and non-rivalrous.
They are usually provided by the government and provide benefits to society.
What is meant by the term Non-Excludable
If one person consumes the good, it does not prevent another from using the same good.
What is meant by the term non-rivalrous
Benefit gained by others does not decrease if more people consume the good.
Explain the free-rider problem
Since the good is non-excludable (anyone can use it) , the people who do not pay for the good benefit the same as people who do pay for it.
So public goods are underprovided since consumers realise they don’t even need to pay for the good and so firms providing it will receive less profit.
What is meant by the term non-rejectability
Meaning you cannot avoid consuming the benefits of this good.
An example is a street light, you cannot avoid using a street light whilst driving, and it will benefit you.
How does a public good have 0 marginal cost
Since it is non-rivalrous, there is no set amount of goods available to consumers, so the cost of providing the good for one more person is 0
What is a Private Good
The goods are rival and excludable.
For example a chocolate bar can only be consumed by one person and lowers the amount available for other consumers.
What is a quasi-public good
A good that has characteristics of both public and private goods.
