Public Goods

Question 1

Explain public goods in relation to the characteristics of excludability and rivalrous

Answer 1

Public Goods:
* Non-excludable
* Non-rival
* Under provided in the free market due to the free-rider problem where even if you dont pay for the good, you still get the benefits of it (E.G. Flood control System/Street Lighting)

Question 2

Define Excludability

Answer 2

Excludable Def:
Consumers can be prevented from consuming the good, if others have already

Question 3

Define Rivalrous

Answer 3

Rivalrous Def:
The benefit of the next consumer diminishes due to it being used by the first consumer

Question 4

Explain private goods in relation to the characteristics of excludability and rivalrous

Answer 4

Private Goods:
* Excludable
* Rival

Question 5

Explain quasi-public goods in relation to the characteristics of excludability and rivalrous

Answer 5

Quasi-public goods:
* Partially excludable
* Partially rejectable
* Non-Rival
* Examples - Roads/paths
* Difficult to force someone to pay for using the good at certain rates.

Question 6

Evaluate the Provision of Public Goods

Answer 6

Firms find it hard to put a price to public goods for consumers. This is because people still benefit from the good even if they do no pay for it, leading to the free-rider problem. In a free-market this leads to the under-provision of the goods by the firms. Therefore in a mixed economy, the government have to intervene, they offer these goods through taxation, making it possible to keep the public goods going.