1.3.3 Public Goods

Private Goods

Goods characterized by rivalry and excludability. Consumption by one individual reduces availability for others, and producers can prevent non-payers from consuming the good.

Public Goods

Goods characterized by non-rivalry and non-excludability. Consumption by one individual does not reduce availability for others, and it is difficult to prevent individuals from benefiting, regardless of payment.

Free Rider Problem

When individuals benefit from a public good without paying for it. Non-payers assume others will pay, leading to underfunding or underproduction of public goods in the private market.

Role of Government

Governments intervene to provide public goods due to their unlikely provision by the private sector. They finance public goods through taxation to ensure fair contribution.

Quasi-Public Goods

Goods with characteristics of both public and private goods. They may have elements of non-rivalry or non-excludability but not to the same extent as pure public goods.