Public Goods Flashcards
What do Public Goods lead to
Market failure due to the problem of missing markets
Describe Private Goods
Excludable
Rivalrous
Features of Public Goods
Non excludable
Non rivalrous
What is the free rider problem
Type of market failure
Because goods are non excludable - people can use a good without paying for it
Leads to a non-provision of the good - no revenue being generated
Causes market failure
What might happen if government provides public goods
They may do it more efficiently - economies of scale
Help prevent under-provision and under-consumption of goods
What is market failure
Market fails to allocate resources efficiently
What is social benefits
Private benefits + external benefits
What is social costs
Private costs + external costs
What is demand equal to and why
Demand = Marginal Utility = Marginal Benefit
Demand curve is based on law of diminishing marginal utility (downward sloping)
What is supply equal to
Marginal cost
Marginal private cost
