ECON1101 Week 7 Lecture 8 - Public Goods and Common Property Resources

Vocabulary-style flashcards covering the definitions and concepts of public goods, common property resources, and market failures from ECON1101 Week 7 Lecture 8.

Rival

A characteristic of a good where consumption by one person makes less available for another person or lowers another’s utility from using it.

Excludable

A characteristic of a good where it is possible to prevent a person from using that good.

Private Goods

Goods that are both excludable and rival, such as food, clothing, cars, and computers.

Public Goods

Goods that are neither excludable nor rival, such as national parks, scenery, and ensuring clean air quality.

Common Property Resources

Goods that are rival and non-excludable, such as ocean fisheries, groundwater, and a low Greenhouse Gas (GHG) atmosphere.

Club Goods

Goods that are excludable and non-rival, such as cable TV and uncongested wireless internet access.

Free-rider

A person who receives the benefit of a good but avoids paying for it, which occurs because firms cannot prevent non-payers from consuming non-excludable goods.

Underprovision

A result of the free-rider problem where a public good is not produced even if buyers collectively value it higher than the cost of providing it.

Horizontal sum of MB

The method used to determine the market demand for Private Goods.

Vertical sum of MB

The method used to determine the market demand for Public Goods by summing individual benefits across all people.

Individual Marginal Benefit (MB)

An individual's personal valuation of a public good which is considered private and not revealed in a market.

ECON3128 Environmental and Resource Economics

The course content where non-market valuation techniques are used to measure individual MB for public goods.

Efficiency for Public Goods

The point where total surplus is maximized, occurring where social $MB = MC$.

Tragedy of the Commons

The overuse of common property resources which creates undesirable outcomes for society because people have no incentive to conserve.

Open access equilibrium

A state where a common resource is priced at zero and consequently squandered, leading to outcomes that are economically inefficient and ecologically unsustainable.

Social Marginal Cost (SMC)

The total cost to society of a resource's use, which differs from private costs due to externalities, expressed as $SMC \neq PMC$.

Quantity Regulation

A government intervention to solve the overuse of common property resources by implementing use restrictions, such as fishing quotas.

Pigouvian Tax

A tax applied to internalize an externality, such as a fishing licence, to manage common resources.

Privatization

The solution of converting a common resource to private property by shifting ownership to an individual so they can charge for use.

Global Commons

The earth’s resources and environmental systems, such as the ozone layer and ocean pollution, that require agreement among governments for proper management.