4.1.8.3 Public goods, private goods and quasi-public goods Flashcards
What are the two key characteristics of pure public goods?
Non-rivalrous: One person’s use doesn’t reduce availability for others (e.g., street lighting).
Non-excludable: Cannot prevent non-payers from benefiting (e.g., national defense).
Why does the free-rider problem lead to underprovision of public goods?
Individuals won’t pay for goods they can access for free (e.g., public parks).
Result: Private firms won’t supply (no profit).
Solution: Government provision via taxes.
Compare public and private goods.
Public: Non-rival (streetlights), Non-excludable (flood control).
Private: Rival (chocolate bar), Excludable (cinema ticket).
What are quasi-public goods? Give an example.
Mixed characteristics: Semi-rival/semi-excludable.
Example: Roads (non-rival until congestion → rival; excludable via tolls).
How has tech changed TV broadcasting’s classification?
Historically: Public good (non-excludable over-air signals).
Now: Excludable via subscriptions (e.g., Netflix, Sky).
Explain the tragedy of the commons with an example.
Issue: Shared resources overused for private gain → depletion (e.g., overfishing, air pollution).
Cause: No ownership → no incentive to conserve.
Solution: Regulation/taxes (e.g., fishing quotas).
Why do governments struggle to provide optimal public goods?
Valuation difficulty: Hard to measure social benefit.
Underfunding: Tax revenue may be insufficient.
Example: Underinvestment in flood defenses.
Give 3 examples of pure public goods.
National defense
Street lighting
Lighthouse services
Draw a market for public goods showing underprovision.
Marginal Social Benefit (MSB) > Marginal Private Benefit (MPB) → gap at socially optimal quantity (Qₛₒᶜᶦₐₗ > Qₘₐʀᴋᴇᴛ).
Are quasi-public goods efficient?
Yes: Private provision possible (e.g., toll roads).
No: May still require subsidies (e.g., rural broadband).
How does this link to environmental market failure?
Tragedy of the commons explains overfishing/pollution → justifies carbon taxes.
What does ‘non-excludable’ mean in practice?
Impossible to charge users (e.g., clean air) → market fails without intervention.
