Market Failure- Public Goods Flashcards
What is the difference between a public good and a private good?
Public goods are non excludable and non rivalry.
Non excludable- means once a good is provided you cant exclude others from consuming your good.
Non rivalry- ones person use of the good doesn’t stop someone else from using it.
Private goods are excludable and rivalrous
Rivalrous- a good where the consumption by one person results in the good not being available for consumption by another.
Excludable- once provided it is possible to prevent others from using it.
What is the free rider problem?
Type of market failure that occurs because everybody is available to benefit form the good. Free riders are a problem because while not paying for the good they may continue to use it. Thus the good is likely to be under provided because the producers won’t supply public goods because they cant make profit.
Are healthcare and education public goods?
No because education is not non excludable. It is very easy to exclude people from education. A university could refuse to accept a student. A teacher could lock their classroom. So education is excludable.
Healthcare- excludable as doctors may refuse to serve you.
If healthcare and education aren’t public goods, why do the government provide it?
To encourage consumption of healthcare and education as they provide positive externalities.
What are some examples of public goods?
Flood defences
