Market Failure & Government Intervention (Y12 & Y13)

Question 1

public goods?

Answer 1

two characteristics:
non-excludable; its very difficult to stop people from using them e.g streetlight
non rival; lots of people can use these at the same time e.g fireworks i can see them so can you.

Question 2

private good?

Question 3

free rider problem? and what can it lead to

Answer 3

consumers wait for others to buy and free ride for public goods
this can lead to 0 demand for public good
which means producers wont supply
= market failure

Question 4

state provision of public goods?

Answer 4

The government/state provides public goods (from tax the government uses and use it to produce public goods) because the market won’t.

e.g police force , roads , parks + flood defences