Public goods and information gaps Flashcards
Define private good.
a good that, once consumed by one person, cannot be consumed by someone else
Define public good.
a good that consumers cannot be excluded from consuming and consumption by one person does not affect amount available for others to consume
Is a private good rivalrous or non-rivalrous?
rivalrous
Is a private good excludable or non-excludable?
excludable
Is a public good excludable or non-excludable?
non-excludable
Is a public good rivalrous or non-rivalrous?
non-rivalrous
Define non-excludability.
situation where it is not possible to provide product to one person without allowing others to consume it as well
Define non-rivalry.
situation in which one person’s consumption of a good does not prevent others from consuming it as well
What is the free rider problem?
when an individual cannot be excluded from consuming a good and so has no incentive to pay for it
Give two examples of public goods.
- street lighting
- nuclear deterrent
- (or many others!)
Define symmetric information.
situation in which all participants in a market (buyers and sellers) have the same information about market conditions
Define assymmetric information.
situation in which some participants in a market (buyers or sellers) have better information about market conditions than others
What source of market failure is reduced by requiring cigarette packets to have health warnings?
information gap
Give two examples of market failure due to sellers having better information than the buyer.
- secondhand cars
- dental treatment
- (and many others)
Give an example of market failure due to buyers having better information than the seller.
insurance
