Micro - public goods ✔️ Flashcards
What is meant by Non Rival goods.
The consumption of a good/service by another individual does not reduce the amount of benefit derived from that good/service to other people. For example a person that is standing by a streetlight does not lose benefit from that street light if another person stands in the light also.
What is meant by Non Excludable goods.
The benefit derived from the good/service is unable to be excluded from certain individuals. For example, the armed services cannot refuse to protect certain individuals who do not pay their taxes. Therefore, these individuals gain as much benefit from the armed services as those who do pay taxes.
Distinction between public and private goods
Private goods are rival and excludable. For example, in order for a consumer to ride the bus they must pay for the ticket before they enter the bus. This makes the bus excludable to those who have not bought a ticket, meaning firms can make a profit in the transportation market.
Public goods are both non excludable and non-rival. Flood defences are a good example of a public good. Flood defences are provided by the government as rational firms will not provide them in the free market. The benefit derived from flood defences cannot be excluded to one person or a group of individuals thus making the good non excludable. This is because flood defences stop flooding in the whole area, not just individual houses.
What is a Quasi-public good
These are goods which have characteristics of both public and private goods. For example, it can be argued that roads share some private good characteristics such as road tolls. These can exclude certain stretches of road to consumers who do not pay a fee to cross. This can make some roads excludable.
