6.2 Micro

Question 1

What two categories can public goods be split into?

Answer 1

Non-excludable

Non-rival

Question 2

What two categories can private goods be split into?

Answer 2

Excludable

Rival

Question 3

What does non-excludable/excludable mean?

Answer 3

Means that non paying customers cannot be excluded from consuming a good, once it has been produced. With the lighthouse once it has emitted its beam of light, all ships in the area can use it to avoid rocks and other hazards
(Excludable = Opposite)

Question 4

What does non-rival/rival mean?

Answer 4

Non-rival means that one person’s enjoyment of the good doesn’t diminish another person’s enjoyment. One person listening to a radio broadcast doesn’t diminish the quality of radio signal to any other user.
(Rival = Opposite)

Question 5

What are quasi public goods?

Answer 5

They may be partially excludable or partially rival. Depending on location and time of day roads may be considered private, quasi public or public goods.

Question 6

What is the tragedy of the commons?

Answer 6

If all people were permitted to let their livestock e.g. cows graze on common land (the Commons) then the resource, in this instance grass, would be depleted
Demand outstrips supply and as the resource is used up there is less and less to go round
Market failure occurs as the market has failed to allocate scarce resources effectively to meet the needs of society
This is relevant to environmental market failure as without constraints on the use of natural resources there will be nothing left for society in the future