1.3.3 Public Goods
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8 Terms
private goods
rivalrous and excludable
public goods
non-rival and non-excludable
non-rival meaning
consumption by one doesn’t reduce the availability of the good for others, it is non-depletable
non-excludable meaning
difficult or costly to prevent individuals from the good, regardless of whether they pay for it
the free rider problem
when individuals benefit from a public good without having to pay for it
so, individuals may not choose to pay for the good, assuming others will pay and they can still enjoy the benefits
leads to underfunding/underproduction of public goods in the private market
why does the gov intervene to provide public goods
because they are unlikely to be adequately supplied by the private sector
how can the gov finance public goods
taxation
quasi-public goods
where a good exhibits characteristics of both public and private goods