public goods Flashcards
what are the 2 characteristics of various goods?
is the good excludable
is the good rival in consumption
what is the problem with public goods?
the free rider problem
what is the free rider problem?
when a consumer does not pay for a good but consumes it
why are private markets not inclined to produce public goods?
due to the free rider problem
what is excludability?
when the property of a good whereby a person can be prevented from using it
what is rival in consumption?
when the property of a good whereby one persons use diminishes other peoples use of that good
what are the 4 kinds of good?
private goods
public goods
common resources
club goods
what are private goods?
when they are both excludable and rival in consumption
what is an example of private goods?
my laptop, only I can use my own laptop and when I use my laptop only I can use it
what are public goods?
when they are neither excludable nor are they rival in consumption
what is an example of public goods?
a public park, you cannot exclude who uses it and when one person uses it, it does not reduce the possibility of use for others
what are common resources?
goods that are rival in consumption but are not excludable
what is an example of common resources?
fishing in a lake, it is not excludable but it is rival in consumption, the more people fish the lake the less fish there are for everyone
what are club goods?
goods that are excludable but are not rival in consumption
what is an example of club goods?
wifi, the price is what makes it excludable but if the more that people buy it, it does not take it away from others
what is a non-excludable good?
a good that people cannot be excluded from consuming, so that it is difficult or impossible to charge for its use (public park)
what is a non-rival good?
a good for which the marital cost of its provision to an additional consumer is 0 (enjoying nature)
what is a free rider?
a consumer or producer who does not pay for a nonexclusive good in the expectation that other will, so they can keep consuming it
what are 3 examples of public goods?
national defence
basic research (general knowledge)
fighting poverty
why can perfect competitive markets not produce public goods?
it creates the free rider problem
how can society produce public goods?
through the political process and the political economy, the government has to provide the public goods
what are common property resources?
goods that are rival in consumption but are not excludable
what is an inefficiency that arises from common property resources?
people don’t have incentive to take in to account how much they are using , as a result the resource can be used up and it reduces the amount that others are able to use
