Public Goods Flashcards
(25 cards)
What is a private good?
- Excludable
- Rival
- Rejectable
What is meant by ‘excludable’?
- Consumers of private goods can be excluded from consuming the product if they are not willing or able to pay for it and don’t benefit from the good or service
Give an example of a good or service that is excludable
- ticket to the theatre
- tickets to a sports event
- meal in a restaurant
What is meant by ‘rival’?
- one person’s consumption reduces the amount left for others to consume
- scare resources are used up in producing and supplying the good or service
- there is an opportunity cost
What is many by ‘rejectable’?
private goods can be rejected
Who supplies private goods and why?
The private sector because they can charge consumers and make a profit
Digital ‘pay per view’ are excludable private goods and is a growing market, list some
- Movies
- News
- Repeat TV
- Online libraries
- Internet services
- Sporting events
Digital ‘pay per view’ are excludable private goods and is a growing market, list some
- Movies
- News
- Repeat TV
- Online libraries
- Internet services
- Sporting events
What are ‘pure public goods ‘ main 3 characteristics?
- Non-excludability
- Non-rivalry in consumption
- Non-rejectable
What is meant by ‘Non-excludability’?
- The benefits of public goods cannot be confined to those who have paid for it
- Non-payers can enjoy the benefits of consumption at no financial cost to them
What is meant by ‘Non-rivalry’?
- Consumption of a public good by one person does not reduce the availability of a good to others
- If a public good is provide, we cannot avoid it
What is meant by ‘Non-rejectable’?
If a public good is provided, we cannot avoid it
What are pure public goods also known as?
Collective consumption goods
Give some examples of pure public goods
- National Defence systems
- Sewage and Waste Disposal Systems
- Lighthouse Protection
- National Rail Safety Systems
- Street Lighting
- Firework Displays
What are ‘Semi-Public (Quasi) Public Goods’?
- These are products that are public in nature, but do not exhibit fully the features of non-excludability and non-rivalry
- They may become non-rival e.g. at peak times when congestion occurs
- On grounds of equity the government may provide these goods directly and finance them through general taxation
- There are is an element of excludability or rivalry in consumption
What are ‘Semi-Public (Quasi) Public Goods’?
- These are products that are public in nature, but do not exhibit fully the features of non-excludability and non-rivalry
- They may become non-rival e.g. at peak times when congestion occurs
- On grounds of equity the government may provide these goods directly and finance them through general taxation
- There are is an element of excludability or rivalry in consumption
Give some examples of semi-public public goods
- Motorways and major roads
- Parks
- Terrestrial television (public service broadcasting)
- Police force protection
- Galleries and museums
- Airwaves
Why does the state provide public goods ‘on grounds of efficiency’?
- easier to provide them collectively
- economies of scale from providing all of them?
Why does the state provide public goods ‘on grounds of equity’?
- so that people on all levels of income can have access to them
- provisions on grounds of need rather than ability to pay
Why does the state provide public goods ‘on grounds of efficiency’?
- easier to provide them collectively
- economies of scale from providing all of them?
Given the nature of the free rider problem how are public goods often financed?
Through some form of enforcement, notably the compulsory nature of the TV License fee
What are good examples of the free rider problem?
- TV license dodgers
- People who choose to evade Council Tax but who still receive local authority services
What are publics bads?
- Environmental damage and global warming affects everyone - no one is excluded from the disbenefits of others polluting economic activity
- Incidence of this are called public bads
How are public goods financed?
- Market cannot provide the incentives needed to supply essential services such as policing and defence causing allocative inefficiency
- Hence public goods are provided collectively by government and financed through general taxation or other forms of charge
e. g. the BBC licence fee
