3.1.5.3 PUBLIC GOODS, PRIVATE GOODS, AND QUASI-PUBLIC GOODS

Define public goods

Goods are commodities or services that are both non-excludable and non-rivalrlous and non-rejectable

Are public goods under or over consumed/produced in the free market?

Under consumed and under produced in the free market

Examples of public goods

National defenses, street lighting, clean air

Define non rivalrous

One person's consumption does not reduce its availability for anyone else

Define non-excludable

It is impossible to prevent people who haven't paid for the good from using or benefiting from it

Define non-rejectable

Once a God has been supplied, an individual cannot opt out for or refuse to consume it

Give examples of public goods?

• a public beach

• public broadcasting

• nuclear deterrent

What type of property rights are private goods associated with?

Private property rights

Is a nuclear deterrent non-rivalrous?

Yes

Is a strawberry non-rivalrous?

It is rivalrous (as it's consumption prevents it from being consumed by another

Why is street lighting a pure public good? (Non-rivalrous)

It is impossible to prevent individuals from benefitting from the light once it is turned on meaning non-payer cannot be kept the dark

Why is street lighting a pure public good? (Non-excludable)

One person's enjoyment of the light does not reduce the amount or quality of the light available for anyone else at the same time

MCQ

Why are nuclear deterrents non-rejectable?

A nuclear deterrent protects an entire nation equally so one person's consumption does not diminish another's

Define the free ride problem

An economic concept where individuals benefit from resources, public goods or community services without paying for them

What is the negative impact of the free rider problem?

If no one pays, this leads to market failure and underproduction as governments and businesses cannot afford to continue providing the good

What concept does the free rider problem link to?

Tragedy of the commons

How much % of GDP does the UK spend on national defense?

2.5%

Give 6 examples the free rider problem

1. Accessing open spaces

2. Fare digging

3. Fly tipping

4. Open access to free Wi-Fi

5. Tac evasion

6. Downloading/sharing games/movies

What does altruism mean?

Acting in the interest of others (for example, giving to charity)

In order to shift social norms, what are 2 things governments do?

Nudge or shove

Give example of nudges and shoves?

Nudges - posters

Shove - tax/fine

Explain the "open access to free Wi-Fi" in terms of the free rider problem?

If a shop has Wi-Fi, people around the area can connect to it so people can enjoy it without paying anything

What are the problems with free Wi-Fi?

The network may become heavily congested, which may cause the city to shut it down or implement a password

What does the Tragedy of the Commons refer to?

individual exploitation of shared resource leads to long term depletion for all

How can you link Tragedy of the Commons to accessing open spaces?

If too many people free ride and overuse the space, without contributing to its care, the land suffers from pollution and damage

Define pure public good

A commodity of service that is seen as both non-excludable and non-rival risk in consumption, anyone can use the good without reducing its availability that others, they cannot be restricted and can never run out

Examples of pure public goods?

National defenses, lighthouses, street lighting

4 examples of pure public goods?

1. Flood defenses

2. Crime control for a community

3. Public services broadcasting services

4. National parks/natural environment

Explain how "flood defenses" are a pure public good?

Once the barrier is built, it protects every home in building and does not reduce the protection of any other buildings

Explain how "crime control for a community" is a pure public good?

Benefit everyone, impossible to exclude any residents, once one resident is using it it does not reduce its availability to another

Are "National parks/natural environment" pure public goods?

No - they are impure public goods

Why are national parks impure public goods?

Authorities can easily build gates, fences, or charge an entrance fee

Parks suffer from congestion so the space and peace is diminished from everyone else

Are public goods always provided by the government?

NO

Define quasi-public goods

Community or service that has some, but not all of the characteristics of a pure public good

They are EITHER non-excludable OR non-rivalrous

Explain how a good can be non-excludable but rivalrous?

A good maybe be free and open to all, but as more people use it, the quality is availability drops for everyone else

Explain how a good can be non-rivalrous but excludable?

It is technically possible and affordable to block people from using the good if they do not pay

Explain what are quasi public goods in regards to semi non-rival?

Up to a certain point multiple people can use the good at the same time without interfering with each other

However, after a certain point congestion occurs

At this point, the quantity, the space, and availability is reduced by everyone else

Explain what are quasi public good in regards to semi non-excludable?

In daily life, the good is left open without a fee

However, the good/service can be easing shut out individuals who refuse to pay

Give an exmaple of a semi excludable quasi public good?

Public highway

A government or public company can install toll booths, camera tracking, or passes to block any drivers you do not pay from passing through

Give 4 Exmaples of quasi public goods?

1. Crowded beaches

2. Crime control for a community

3. Public services broadcasting services

4. National parks/natural environment

Explain how toll roads are quasi public goods?

When not busy, any driver can use it without affecting another however during rush-hour, traffic slows down and space runs out making it rivalrous

It I also very easy to make it excludable by installing tollbooths or cameras to block or find drivers who do not pay

Define private goods

A product of service that is both excludable and rivals in consumption

How are private goods excludable?

Easy and illegal to prevent people who haven't paid from consuming it

How are private goods rivalrous?

One person's consumption of a God completely prevents or reduces anyone else's ability to consume the exact same item

Give an example of a private good being excludable?

A paid for cinema ticket

Given an example of a private good being rivalrous?

Eating an apple

How do private goods affect pricing and profit compared to public goods?

Private - market driven (they are sold for the price that aims to cover costs and generate profit

Public - market failure (since people can be free riders, private firms rarely profit here so they are usually government funded)

Examples of private goods?

Private gyms, exclusive clubs, tickets to an event, meals at a restaurant, a cup of coffee, a McDonald's burger, a pair of jeans, a haircut or a paid airplane ticket

How do governments fund public goods? How does this make it fairer?

Through taxation (this ensures, everyone contributes to the funding of the public goods, ensuring that the cost costs are distributed across the entire population)

Who are the only people willing to produce public goods?

The government

When are public goods free to consumers?

Free at the point

How has live streaming of events changed with technology? (linked to the fact, it is a public good?

Due to technology platforms can now track users, enforce paywalls and block non-paying viewers, which means it has become a private/quasi public good as there may be a charge

What does totally non-rival in consumption mean?

Multiple people can consume at the same time

Give one argument for and one argument against state provision of a public good

What else does state provision of a public good promote?

Social welfare and equality

How do taxes negative impact the market?

They distort the market forces, decreasing demand and supply

With a public good, what is the MC of providing the good to an extra consumer? Why?

0 - as when an extra person benefits from a public good, the benefits available to other people are not reduced

Why is the MC providing the good to another consumer 0?

The government has already provided it for all

When P = MC, what does mean for all factors of production?

All factors of production are allocated effectively

What are public "bads"?

Something which negatively affects a large population equally, it is both non-excludable and non-rivalrous

Explain how a public "bad" is non excludable?

Not prevent people from experiencing its effects

Explain how a public "bad" is non rivalrous?

One person experiencing it, does not reduce its burden to another

Are public "bads" under or over produced? Why?

Over (as they have no cost)

Give examples of public "bads"?

Pollution, CO2 emissions, COVID 19, wealth inequality, cyberattacks, viruses , collecting rubbish

How can people free ride with public "bads"?

When they benefit from the effort of others who are actively reducing the harm, without doing their own part or paying the cost to help

Give an example of how people can freeride with public "bads"?

Fly tipping