76: Public Goods Flashcards
excludable
suppliers of a good can prevent people who don’t pay from consuming it
rival in consumption
the same unit of good cannot be consumed by more than one person at the same time
non-excludable
suppliers cannot prevent consumption by people who don’t pay
non-rival in consumption
more than one person can consume the same good at the same time
private goods
excludable and rival in production
ex: wheat
common resources
nonexcludable and rival in producton
ex: clean air, water
artificially scarce goods
excludable and nonrival
ex: software, netflix
public goods
nonexcludable and nonrival
ex: national defense, public sanitation
what goods can markets supply efficiently?
private goods
free rider problem
if a good is nonexcludable, rational consumers won’t be willing to pay for it
effect of non-exludablity on efficiency
inefficiently low production due to free rider problem
effect of non-rivalry on efficiency
inefficiently low consumption b/c price > MBprivate
ways to provide public goods (4)
1) voluntary donations
2) self interested ppl who could make money (ex: TV commercials)
3) make excludable w/ licenses
4) peer pressure in small communities
MSB for public good
sum of marginal private benefits for all consumers of that unit
overuse
depletion of a common resource that occurs when individuals ignore that their use depletes availability for others
