Public Goods Flashcards
(18 cards)
What is a public good?
A good or servvce that every member of a society can use without reducing its availablity to others
What is an example of a public good?
Flood defense or street lighting
What are the characteristics of public goods?
Non-excludability
Non-rivalry
Non-rejectable
What is non-excludability?
people can not be stopped from consuming the good even if they haven’t payed for it
What is non -rejectable?
You can’t choose not to benefit from it
What is non-rivalry?
One person benefiting doesn’t stop others benefiting
Public goods have zero marginal cost
What arre characteristics of private goods?
Excludable
Rvivalry
Rejectable
What are quasi-goods?
Goods that partly exhibit pbulic good characteristics
What are examples of quasi-goods?
Roads
What can cause public goods to turn private?
New technology
What does the non-excludablitity lead to?
The free rider problem
What is the free rider problem?
once a public good is provided, it’s impossible to stop someone from benefiting from it even if they haven’t paid for it.
Why can’t the price mechanism work if there are free riders?
Consumers won’t pay for a public good that they can get for free
Why won’t public goods be provided?
Everyone will be waiting to see who will provide the good
Why is it hard to see a price for public goods?
DIfficult to work out the value
Producers will overvaule
Consumers will undervalue the benfits
Why does the government have to provide public goods?
The problems related to the free rider problem means firms are reluctant to provide and problems will cause market failure
What is the tradegy of commons?
The idea that people acting in their own best interests will overuse a common resource without considering that this will ead to the depletion or degradadtion of that resource
Why does the government intervene in an environmental market failure?
To prevent the destruction and degradation of a common resource
