Classifying Goods - Introduction Flashcards Preview

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when do goods need classification

when the goods do not have price and are not usually produced by markets


what is the 2 criteria to classify goods

1. Rival Consumption - whether a good is rival in consumption (does the consumption by one reduce supply to others?)
2. Excludable Good - whether a good is excludable (is it possible to exclude non payers from consuming g/s)


what are 3 examples of excludable/non and rival/non (Memorise Table)

excludable - phone, spotify, clothes
non excludable - oceans, lighthouse, nation defense
rival - computer, phone, ocean
non rival - netflix, national defense, parks


what is the difference between private/club goods and common resources/public goods

private/club - have prices so market can get profit from supply
common/public - no prices so markets can not supply them


what is a free rider and what type of good do they ride

people who consumer without paying (ride non exlcudable goods: common resource and public)


What are the characteristics of a private good

1. rival in consumption
2. excludable from non payers


who provides and who purchases most private goods

free markets provide good amounts of private goods because consumers (mainly households) are willing to pay and producers have profit incentive


what are the characteristics of a club good or quasi public goods

1. non rival
2. excludable from non payers


how are club goods used

collectively by a big group of people (movies)


what is an example of a private good

soft drink, housing


what are the characteristics of a public good

non rival in consumption
non excludable from non payers


what are 3 examples of public goods

fireworks, free to air TV, lighthouse


who provides public goods and who doesnt

many PG are essential for society welfare so gov will finance and provide them (from tax)
private business odesnt because there is no profit to be made


what are merit goods and why are they confused with public goods

public education/health (hospital beds, number of kids in schools)
are exclduable (can be priced) and rival (subject to congestion)


why do gov provide merit goods

because if only private mkt provided schools/health it would be under consumed (too expensive) so gov subsidies heavily to encourage consumption


what are the characteristics of a common resource (are there property rights)

rival in consumption
non excludable from non payers
(no clear property rights)


what are 3 examples of common resources (explain)

ocean - there is no price on fish you catch, so people encouraged to consumer as much as the want
endangered species - many overhunted, species dies out
congested freeway - congested at peak time putting external cost on others


do common resources create an externality?

YES - a neg ext is imposed on others when CR like fish are caught (qty depletes)


what is the tragedy of the common (Common resources)

people pursue self interest resulting in over consumption and depletion of common resources


how do gov get involved to regulate common resources (fishing and roads example)

fishing - season is restricted, bag amounts are controlled
traffic - road tolls