Studied by 4 people
What are public goods?
goods that are:
Non-rival goods
where consumption of the good does not reduce the amount available for consumption by others
Non-excludable goods
where, once provided, it is impossible to stop other individuals from using them
What are some examples of public goods?
National defence. If you protect the country from invasion, it benefits everyone in the country.
Street lighting- if you provide light at night, you can’t stop anyone consuming the good. Walking under a streetlight doesn’t reduce the amount of light for others.
Police service- If you provide law and order, everyone in the community will benefit from improved security and reduced crime.
Flood defences – Protecting the coastline against flooding provides benefits for the whole community.
The internet. - Once websites are provided, everyone can see the website for free, without reducing the amount available to others.
What’s the free-rider problem?
free-rider = someone who benefits from a good/service w/out paying for it.
enough people can enjoy a good w/out paying for the cost —> danger that good will be under-provided
Private goods, are goods that are:
Rival goods
where consumption of the good reduces the amount available for consumption by others
Excludable goods
where, once provided, it is possible to stop other individuals from using them
What are examples of private goods?
Rival goods:
A ticket to the theatre or a meal in a restaurant or pay-per-view sporting events are private goods because buyers can be excluded from enjoying the product if they are not willing and able to pay for it.
Excludable goods
An airplane ticket only allows one person to fly. Thus, using an airplane ticket excludes others from using the same ticket.
The airplane ticket is also excludable because the use of the airplane ticket is limited to the person who purchased it.
What are quasi-public goods?
type of good/service that exhibits some but not all of the characteristics of a pure public good
what’s the rivalry & excludability like for quasi-public goods?
Rivalry - consumption of 1 person may limit the availability or quality of the good to others EG a park may be open to everyone but if it’s crowded the experience for each person may be diminished
Excludability - QPGs are partially E.G anyone can use a public park, some parts of the park may require a membership (sports facility)
What is technical change?
the process of innovation, invention and the widespread use of technology in society.
How can technical change lead to markets providing private goods?
markets providing non-excludable and non-rival goods
means public goods can become private goods over time.
e.g example, the ULEZ zone in London, as you are now being excluded from using the roads unless you pay for the charge.
