public goods Flashcards
what is a public good
gov provided good that benefits society. Non rivalry and non excludable. Not provided by the free market- non rejectable. Marginal cost is 0- no additional cost- once the good is provided, allowing more people to benefit from it usually incurs no extra cost.
what are the characteristics of a public good
non rivalrous
non- excludable
zero marginal cost
non rejectable
why is the marginal cost 0
no additional cost
once the good is provided, allowing people to benefit from it incurs no additional cost
why are they non rivalrous
1 consumers enjoyment of a goods benefits doesn’t diminish any ither consumers enjoyment of its benefits
why are they non excludable (by producer)
cant confine benefits to an individual because they’ve paid
designed to be accessed by everyone
why are they non rejectable
designed to serve societies as a whole, regardless of individual preferences.
Public goods affect everyone within the area of provision, regardless of whether they wish to benefit from them
what are examples of public goods
(its so okay if you don’t guess these they’re just examples for you understanding- be kind to yourself)
lamppost (like any street lighting)
flood mechanisms
national defense like the army
what is a private good
belongs to someone and you have to pay for it- if you don’t your excluded from it
how do private goods exclude people
through the price mechanism. If customers cannot afford to buy them, then they are excluded
how are private goods rivalrous
Customers can compete for these goods, which are limited in supply and this rivalry helps to generate profits for firms
what is a quasi public good
have characteristics of public goods and private goods.
what are the characteristics of a quasi public good
(don’t deep too much notice the pattern :))
semi- non rival
semi- non excludable
why are they semi non rivalrous
under certain conditions, consumption by one individual does not significantly diminish the availability of the good for others. However, rivalry can arise when usage exceeds capacity
e.g
during rush hours, congestion occurs, and more drivers reduce the road’s utility for everyone (rivalrous)- this is where toll roads come into play
why are they semi non excludable
because it is possible to prevent some individuals from using them, typically through mechanisms like pricing or access controls.
e.g
Some healthcare services require payment or insurance, making them excludable. However, emergency care is often provided regardless of payment (non-excludable).
what is the free rider problem
when people benefit from a public good without paying for it. they rely on others to pay for the provision of the good whilst still enjoying the benefits of it
Over time, any customers who are paying for the goods will stop
At some point firms will stop providing these goods and they will become under-provided in society, resulting in a missing market and a complete market failure
Governments usually provide public goods but the quantity provided may be less than the socially optimal level
