a) Free rider problem

• define non-excludable

• when a good is difficult to prevent non-payers from consuming

• define non-rivalrous

• when one person’s consumption of a good does not prevent another’s consumption

• define public good

• a non-excludable and non-rivalrous good

• define private good

• an excludable and rivalrous good

• describe how private goods can produce profit for firms

• excludable → consumers must pay to consume

• rivalrous → consumers are more incentivised to consume to access the limited supply

• state why public goods do not produce profit for firms

• the free rider problem

• explain the free rider problem

• consumers realise they can still consume the good without paying

• paying consumers stop paying

• firms stop producing