Public goods Flashcards
What is a public good?
Public good- goods which display characteristics of non-rivalry & non-excludability in consumption
In other words once provided, cost of supplying to 1 extra consumer = 0
What are examples of a public good?
defence, 🗑 collection
Is the NHS a public good?
NHS- rivalry in consumption- limited capacity- instead merit good with ➕ externality
Is education a public good?
EDUCATION- rivalry in consumption- limited capacity- instead merit good with ➕ externality
What are private goods?
Private goods- opposite to public goods- display characteristics of rivalry & excludability in consumption
What are examples of private goods?
🍫, 🚙
What does non-rivalry mean?
Non-rival- consumption of product ✖️ prevent another person from also consuming product
What is a non-excludable good?
Non-excludable- once good provided- impossible to stop ✋ ppl from using it
What is an example of a non-excludable good?
lighthouse
What is the free rider problem?
Free-rider problem- cause of under provision of public goods- ✖️ possible for firms to prevent consumers who ✖️ pay 💵 for public good from using it
- … consumers likely to wait for public good to be provided & reap benefits for free (without 💵) … firms ✖️ provide public good as unprofitable
- … public good likely to be under provided/✖️ provided at all
- … solution = government provision- funded by taxation
What is a real life example of the free rider problem?
REAL LIFE EXAMPLE: flood defence set up by company who asks for 💵 from ppl benefiting from defence BUT if ppl refuse to pay 💵 then they benefit without paying … company experiences loss & in future public good may ✖️ be provided at all because fear of happening again … public goods have to be provided by government to prevent this from happening
What is an example of a non-rivalry good?
Radio 📻 programme
