Classifying Goods - Introduction

Question 1

when do goods need classification

Answer 1

when the goods do not have price and are not usually produced by markets

Question 2

what is the 2 criteria to classify goods

Answer 2

1. Rival Consumption - whether a good is rival in consumption (does the consumption by one reduce supply to others?)
2. Excludable Good - whether a good is excludable (is it possible to exclude non payers from consuming g/s)

Question 3

what are 3 examples of excludable/non and rival/non (Memorise Table)

Answer 3

excludable - phone, spotify, clothes
non excludable - oceans, lighthouse, nation defense
rival - computer, phone, ocean
non rival - netflix, national defense, parks

Question 4

what is the difference between private/club goods and common resources/public goods

Answer 4

private/club - have prices so market can get profit from supply
common/public - no prices so markets can not supply them

Question 5

what is a free rider and what type of good do they ride

Answer 5

people who consumer without paying (ride non exlcudable goods: common resource and public)

Question 6

What are the characteristics of a private good

Answer 6

1. rival in consumption

2. excludable from non payers

Question 7

who provides and who purchases most private goods

Answer 7

free markets provide good amounts of private goods because consumers (mainly households) are willing to pay and producers have profit incentive

Question 8

what are the characteristics of a club good or quasi public goods

Answer 8

1. non rival

2. excludable from non payers

Question 9

how are club goods used

Answer 9

collectively by a big group of people (movies)

Question 10

what is an example of a private good

Answer 10

soft drink, housing

Question 11

what are the characteristics of a public good

Answer 11

non rival in consumption

non excludable from non payers

Question 12

what are 3 examples of public goods

Answer 12

fireworks, free to air TV, lighthouse

Question 13

who provides public goods and who doesnt

Answer 13

many PG are essential for society welfare so gov will finance and provide them (from tax)
private business odesnt because there is no profit to be made

Question 14

what are merit goods and why are they confused with public goods

Answer 14

public education/health (hospital beds, number of kids in schools)
are exclduable (can be priced)  and rival (subject to congestion)

Question 15

why do gov provide merit goods

Answer 15

because if only private mkt provided schools/health it would be under consumed (too expensive) so gov subsidies heavily to encourage consumption

Question 16

what are the characteristics of a common resource (are there property rights)

Answer 16

rival in consumption
non excludable from non payers
(no clear property rights)

Question 17

what are 3 examples of common resources (explain)

Answer 17

ocean - there is no price on fish you catch, so people encouraged to consumer as much as the want
endangered species - many overhunted, species dies out
congested freeway - congested at peak time putting external cost on others

Question 18

do common resources create an externality?

Answer 18

YES - a neg ext is imposed on others when CR like fish are caught (qty depletes)

Question 19

what is the tragedy of the common (Common resources)

Answer 19

people pursue self interest resulting in over consumption and depletion of common resources

Question 20

how do gov get involved to regulate common resources (fishing and roads example)

Answer 20

fishing - season is restricted, bag amounts are controlled

traffic - road tolls