L26 - Public Goods and Common Resources Flashcards
What are Rivalrous Goods?
Can’t consume the good at the same time as someone else
What are the three categories of Rivalrous Goods?
1) Some can be consumed only be one person
2) Some can be consumed by more than one person, but not at the same time
3) Some can be consumed by more than one person at the same time, but not by another person at the same time
What are Non-Rivalrous goods?
You can consume the good at the same time as someone else
What is Excludibility?
Being prevented from consuming a good if you refused to pay
What are the two categories of Excludibility?
1) Products from which non-payers COULD be excluded and ARE excluded
2) Products from which non-payers COULD be excluded and ARE NOT excluded
What are Non-Excludable Goods
Where you aren’t prevented from consuming a good if you refused to pay.
How can a good change from Non-Excludible to Excludible?
Changes in technology
What are the 4 types of goods?
- Private Goods
- Club Goods
- Common Resources
- Public Goods
What are the features of Private Goods?
They are rival and excludable
What are features of Club Goods?
They are Non-rival and Excludible
What are features of Common Resources?
They are Non-excludable and Rival
What are features of Public Goods?
They are Non-rival and Non-excludable
What is the Free Rider problem?
Someone who doesn’t pay for a good still receiving its benefits.
If a good is non-excludable then people have incentive to free ride since firms cannot stop them consuming the good.
Why is it difficult for the Govt to provide at the efficient level?
- Difficult since Govts. have limited info about:
1) MSC of Govt. services
2) MSB of Govt. services
How does the Govt decide whether to spend public money?
1) Cost-Benefit Analysis
2) May spend on projects that win most votes
