LS18- Public Goods

Question 1

Public goods

Answer 1

Goods which are non rivalrous and non excludable

non excludable- no price can be charged to exclude consumers from purchasing the good because the benefits of consuming that good cannot be confined solely to individuals who have paid for it

non rivalrous- upon consumption of the public good, the supply available to others remains exactly the same e.g. roads, beaches, street lights

Question 1

Public goods evaluation

Answer 1

Not all public goods are pure public goods- there can be quasi goods which possess one but not the other characteristic of a pure public good or that sometimes possesses the characteristics of a pure public good but sometimes not. e.g. roads during rush hour times when there is stand still congestion become a rival good

Technology is changing the nature of public goods in particular making it easier to exclude consumers from the consumption of public goods e.g. electronic road pricing, music and video streaming services

Question 1

Free rider problem

Answer 1

When rational consumers will not contribute at all to the provision of the public good waiting instead for others to contribute to free ride off their contribution
- if every consumer acts this way, there would be no contribution towards the provision of public goods, taking away the incentive for private firms to supply them with no profit made leading to no supply of the public goods in the market, a missing market and complete market failure