Lesson 16 - Public And Private Goods

Question 1

What is a public good? (give an example)

Answer 1

• their use cannot be prevented
• one persons use does not affect another persons use
  Example = drains in the street

Question 2

What are private goods?

Answer 2

• one persons use affects another persons use of the good or service
• can exclude others from using the good

Question 3

What are the characteristics of public goods?

Answer 3

• non rival
• non excludable

Question 4

What is the free rider problem?

Answer 4

• the non excludability of public goods means that free riders can enjoy it without paying
• the incentive to then provide this good disappears, because producers aren’t receiving profits from these free riders

Question 5

What are quasi-public goods? (give an example)

Answer 5

• not fully rival
• may be possible to exclude some people
  Example = roads (rush hour - my use affects others)

Question 6

How can governments intervene to solve the free rider problem and what is the problem with this?

Answer 6

• making people pay for public goods through taxation
• some people may pay for certain goods or services through their tax but never actually use it themselves