CH18 Public goods Flashcards
what is a private good?
a good which possesses the characteristics of rivalry (once consumed, it cannot be consumed by anyone else) and excludability ( it is possible to prevent someone else from consuming the good)
what are public goods?
these are goods which possess the opposite characteristics to private goods:
-non-rivalry: consumption of the good by one person does not reduce the amount available for consumption by another person; sometimes this is known as non-diminishability
-non-excludability: once provided, no person can be excluded from benefiting; equally, no person can opt out of receiving the good, this is known as non-reject ability.
what is one reason (hint: to do with costs) why public goods and private goods are different?
because the marginal cost (the extra cost) of providing a unit of public goods is zero
what type of good is clean air?
a public good
what are the 4 goods which are argued to be public goods?
-defence
-the judiciary and prison service
-the police service
-street lighting
what is a free rider?
a person or organisation which receives benefits that others have paid for without making any contributions
what would happen if the provision of public goods were left to the market mechanism? and why?
-if the provision of public goods were left to the market mechanism, there would be market failure.
-this is because of the free rider problem. A public good is one where it is impossible to prevent people from receiving the benefits of the good once it has been provided. So there is very little incentive for people to pay for consumption of the good. In a free market economy, national defence is unlikely to be provided. A firm attempting to provide defence services would have difficulty charging for the product since it could not be sold to benefit individual citizens. The result would be that no one would pay for defence and therefore the market would not provide it. The only way around this problem is for the state to provide defence and force everyone to contribute to its cost through taxation
what are quasi-public goods?
goods which do not perfectly possess the characteristics of non-rivalry and non-excludability and yet which also are not perfectly rival or excludable
