Classification of Goods and Services Flashcards
What is excludability?
It is when someone can be stopped from consuming something.
What is rivalry?
When if one person consumes a unit someone else cannot.
What are the types of goods?
- Free Goods
- Quasi-Public Goods
- Public Goods
- Private Goods
What is a Private Good?
It is a good that is excludable and rivalrous, and is charged a price for scarcity of resources.
What is a Public Good?
Public Goods are non-excludable and non-rivalrous.
What is a Free Good?
They are goods not limited by scarcity, and have 0 opportunity cost.
What is a Quasi-Public Good?
These are goods that are either non excludable and rivalrous, or excludable and non-rivalrous.
What is the problem with Public Goods?
- free rider problem
- no profit received
What do Merit and Demerit Goods share?
They are goods affected by information failure.
What are some traits merit goods?
- Provide Social Benefit
- Under provided and under consumed because of information failure
- Expensive to create/fund
What are some traits of Demerit Goods?
- Cause Social Cost
- Overconsumed because of information failure
- Overproduced because of high demand
- Mostly addictive
State the relation between low income and Merit Goods.
Low income contributes to the lack of merit good consumption.
Why are demerit goods so easily consumed?
- Cheap
- Addictive
- Information Failure
