Scribd
Upload
163 views13 pages

1public Goods PDF

The document discusses public goods and how they differ from private goods. Public goods are characterized by non-exclusion, meaning it is impossible to prevent people from consuming the good even if they do not pay for it, and non-rivalry, meaning that one person's consumption of the good does not diminish another person's consumption. Examples given are national defense, public fireworks displays, and flood control dams. The free-rider problem prevents private markets from providing public goods, so governments provide many public goods and pay for them through tax revenue.

Uploaded by

Katie Barnes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
163 views13 pages

1public Goods PDF

The document discusses public goods and how they differ from private goods. Public goods are characterized by non-exclusion, meaning it is impossible to prevent people from consuming the good even if they do not pay for it, and non-rivalry, meaning that one person's consumption of the good does not diminish another person's consumption. Examples given are national defense, public fireworks displays, and flood control dams. The free-rider problem prevents private markets from providing public goods, so governments provide many public goods and pay for them through tax revenue.

Uploaded by

Katie Barnes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 13

PUBLIC GOODS

Sources:
Managerial Economics by Edwin Mansfield and Economics by Paul
Wonnacott/Ronald Wonacott
Public goods in its broad definition
is

ANYTHING THE GOVERNMENT


PROVIDES
A public good provides benefits that are
available to everyone. No one can be
excluded from enjoying this good,
regardless of who pays for it.

A major hallmark in public good is that it


can be consumed by one person without
diminishing the amount that other people
consume of it.
CHARACTERISTICS OF A
PUBLIC GOOD:
Non-exclusion:
The inability of a seller to prevent people from
consuming a good if they do not pay for it.

Non-rivalry:
The characteristic that if one person consumes a
good, another persons pleasure is not diminished,
nor is another person prevented from consuming it.
Example of a public good:

Lighthouse
- Once it is built, no sailor can be
excluded from using its services. All
sailors are protected from the rocks
whether or not they helped to pay
for it.
Other Examples of Public Goods:

National defense
Public fireworks display
Flood-control dam
Roads and highways
Information goods
PUBLIC GOODS VS. PRIVATE GOODS
Public Good No ability to exclude and no rivalry for
benefits.
Private Good Clear ability to exclude and rivalry for
benefits.

Rival? Yes Rival? No

Excludable? Private Goods Excludable? Public Goods


Yes
Ice cream cones No Tornado Siren
Clothing National defense
Food and Drinks Air traffic control
THE FREE-RIDER PROBLEM
A free-rider is a person who receives the benefit of a
good but avoids paying for it.

Since people cannot be excluded from enjoying the


benefits of a public good, individuals may withhold
paying for the good hoping that others will pay for it.

The free-rider problem prevents private markets


from supplying public goods.
Solving the Free-Rider Problem
The government can decide to provide the
public good if the total benefits exceed the
costs.

The government can make everyone better


off by providing the public good and paying
for it with tax revenue.
Marginal Social Benefit of a Public Good
Total benefit is the dollar value that a person places on a
given quantity of a good.

The greater the quantity of a good, the larger is a


persons total benefit.

Marginal benefit is the increase in total benefit that


results from a one-unit increase in the quantity of a
good.

The marginal benefit of a public good diminishes with


the quantity of the good provided.
PRIVATE GOODS

Aprivate goodis a product that must be purchased to be


consumed, and its consumption by one individual prevents
another individual from consuming it. Economists refer toprivate
goodsas rivalrous and excludable.

In daily life,examples of private goodsabound, including food,


clothing, and most othergoodsthat can be purchased in a store. Take
anexampleof an ice cream cone . It is both excludable and rivalrous. It
is possible to prevent someone from consuming the ice cream by
simply refusing to sell it to them.
Excludable Excludable
Rival Non-rival
(Pure Private Good) Cable TV
Most consumer goods Highways
Movies

Non-excludable Non-excludable
Rival Non-rival
Clean air and water (Pure Public Good)
National Defense
The end
Bongcawil
Amantiad
Calacat
Libetario

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy