1.6 Classification of Goods and Services

Flashcards reviewing free and private goods, public goods, merit goods, and demerit goods from A-Level Economics lecture notes.

What are free goods?

Resources that are abundantly available and do not incur a cost when consumed.

What are the characteristics of free goods?

Abundance, no opportunity cost, and non-excludability.

Give some examples of free goods.

Air, sunlight, and seawater.

What are private goods?

Goods owned by individuals or corporations, characterized by excludability, rivalry in consumption, and being priced in markets.

Give some examples of private goods.

Clothing, food, and personal electronics.

What are the economic implications of free and private goods?

Economic efficiency and failures, externality considerations, and policy implications requiring government intervention.

What are the challenges in managing free and private goods?

Sustainability concerns, market failures, and government interventions.

What are the characteristics of public goods?

Non-excludability and non-rivalry.

What is non-excludability?

Once a public good is provided, it is not feasible to exclude individuals from using it.

Give some examples of non-excludable public goods.

National defense services and public parks.

What is non-rivalry?

The consumption of the good by one person does not reduce its availability to others.

Give some examples of non-rival public goods.

A lighthouse and a public broadcast.

What is a problem of market provision in regards to public goods?

Private markets often fail to produce public goods in optimal quantities, leading to a market failure.

What is a primary source of funding for public goods?

Taxation.

What is the government's role in addressing the free-rider problem?

Implementing laws and regulations and direct provision and public awareness.

What does addressing equity in access mean in regards to public goods?

Ensuring that public goods are accessible to all, regardless of socio-economic status.

What are alternative methods of financing public goods?

Public-Private Partnerships (PPPs), crowdfunding, and voluntary contributions.

What are merit goods?

Products or services that are considered beneficial for both individuals and society but are under-consumed when provided solely by the market.

What are the key characteristics of merit goods?

Positive externalities and they are under-valued by consumers.

Give some examples of merit goods.

Education, healthcare, vaccinations, and public libraries.

What are the reasons for the under-consumption of merit goods?

Lack of awareness, immediate costs vs. long-term benefits and external benefits overlooked.

What are government interventions to promote merit goods?

Direct provision, subsidies, legislation and policies, public awareness campaigns and collaborations with the private sector.

What's the government role in education as a merit good?

Establishing and maintaining a robust public education system, providing financial assistance, and setting and enforcing quality standards.

What's the government intervention in healthcare as a merit good?

Creating and managing public healthcare systems, initiating health education programs, and regulating healthcare services and products.

What are demerit goods?

Products or services that generate negative externalities, where the social costs of consumption exceed the private costs.

What are characteristics of demerit goods?

Negative externalities, over-consumption in free markets and information failure.

Give some examples of demerit goods.

Tobacco, alcohol, junk food and polluting vehicles.

What are the causes of over-consumption of demerit goods?

Information asymmetry, myopic behavior, and addictive properties.

What are the economic and social implications of demerit goods?

Healthcare costs, social problems, and resource misallocation.

What are government interventions to control consumption of demerit goods?

Taxation, regulation, public campaigns and substitution and alternatives.

What are some regulations for tobacco control?

Bans on smoking in public places, age restrictions, and strict advertising regulations as well as high excise taxes on tobacco products.

What are some regulations for alcohol control?

Setting a minimum price per unit of alcohol to prevent extremely cheap sales, regulations on the hours and locations where alcohol can be sold and campaigns about the dangers of excessive alcohol consumption.

What are some regulations for fast food and obesity?

Mandating fast-food chains to display calorie counts and nutritional information as well as education programmes in schools to encourage healthy eating habits from a young age.