Chapter 30: Gov't and Market Failure

Private goods have 2 characteristics

Private goods have 2 characteristics

Rival and exculdable

Private good example

Ice cream cone

Public goods have 2 characteristics

Non rival and non excludable

Public good example

Fireworks

Negative externality example

Pollution

If govt ignores neg externalities

It is over allocated

If govt addresses neg externalities

Tax moves supply curve left

Positive externality example

Education, Vaccine

If govt ignores pos externality

it is under allocated

If govt addresses post externality

subsidy on demand curve (and supply curve)

Coarse theorem

Small # of people, low transaction costs and ownership of property rights