the supply of the good is limited; or is the number of people who may consume the good changed if you consume it
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Excludability in goods as if...
everyone is free to consume the good or is the good limited to people who exchange something for it
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Rival good
a good where only a limited number of people can consume it
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Non-rival good
a good where the supply is "unlimited" and one person's consumption has no effect on the ability of others to consume the same good
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Excludable good
a good where consumption is limited to people who can pay for it
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Non-excludable good
a good where everyone can consume it without needing to exchange anything for it
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Private good
a good which is excludable and rival
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Common Resource
a good which is rival and non-excludable
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Club good
a good which is non-rival and excludable; because price is greater than the marginal cost, the consumption of the good is sufficiently low
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Public Good
a good which is non-rival and non-excludable
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Hardin and the tragedy of the commons
without intervention, we consume common resources to extinction due to lack of individual property rights and economic incentives that encourage consumption
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Ostrum view
optimal outcomes are possible with cooperation and shared property rights; this is most likely to work with a small number of similar beneficiaries who control access to the resource
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Club goods are considered to be a type of monopsony because...
the supplier charges more than is necessary because they have the power to exclude people
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Free-rider problem
rational response of public goods; someone who enjoys the benefits of a good without paying; enjoying a positive externality
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Public goods are often.... or provided by the government due to...
subsidized; the free-rider problem and positive externalities
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Externality
a side effect of an activity that affects bystanders whose interests aren't taken into account
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Failing to account for externalities leads to.... as...
market failure; you're missing out on the social benefits/costs that could possibly be achieved
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Market failure
when the market, on its own, does not allocate resources efficiently in a wat that balances social costs and benefits; optimal outcome is not achieved
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Four types of market failures include
(1) positive externalities, (2) negative externalities, (3) public goods, and (4) common resources
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Positive externalities
when bystanders, not involved in the production or consumption of the good or service, benefit from others consumption or production
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marginal private benefit
the benefit from one extra good enjoyed by the buyer
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external benefit
a benefit received by bystanders
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marginal external benefit
the additional extra benefit from one more unit to bystanders
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marginal social benefit
all marginal benefits, no matter who gets them
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Marginal social benefit is calculated by
marginal private benefit plus marginal external benefit
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In a perfect market marginal private benefit is...
equal to marginal social benefit because the only person who benefits is the person who consumes the good
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Examples of goods with positive externalities
vaccines, education, and flowers
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When graphing it is important to remember that both.... and .... are ... values
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