1.3.3: Public Goods Flashcards
What are public goods?
Good that are available to all, once provided. They are non-rivalry and non-excludability.
What is non-rivalry?
One person benefiting from the good doesn’t affect others from benefitting from the same good.
What is non-excludability?
All consumers receive the same amount of utility from the good.
What is an example of a public good?
Street lights: available to everyone (non-excludability) and everyone receives the same amount of utility (non-rivalry).
What are quasi-public goods?
A near-public good that has many - but not all - of the characteristics of a public good.
What is an example of a quasi-public good?
Roads: tolls (excludability) and congestion (rivalry).
What is the free-rider problem?
It is impossible to stop someone from benefitting from a public good, even if they haven’t paid for it.
What is a free-rider?
Someone who receives the benefits without paying for it.
Why would the private sector not provide public goods?
The producers can’t be sure of making a profit (due to the non-excludability of the goods).
If the provision of public goods was left to the market mechanism…
… it would lead to market failure.
How are public goods financed?
Taxes.
