23) Public and merit goods

Question 1

What are private goods?

Answer 1

1) Rivalrous (another person consuming the good/service will reduce your utility)
2) Excludable (it is possible to prevent people from consuming the good/service)

Question 2

What are public goods?

Answer 2

1) Non-Rival (your utility is not reduced by others consuming the good/service as the “amount” of the good/service is not reduced
2) Non-Excludable (not possible to stop someone else consuming the good/service)

Question 3

What is the free rider problem?

Answer 3

When people can consume a good without paying towards it

Question 4

What is a merit good?

Answer 4

A good that is considered to be underproduced if left solely to the market. (Positive consumption externalities)

Question 5

What is a demerit good?

Answer 5

A good that is considered to be overproduced if left solely to the market. (Negative consumption externalities)