Types of Goods Flashcards
What are public goods and its characterisitics?
a commodity or service that is provided without profit to all members of a society, either by the government or by a private individual or organization
Characteristics:
1) NON EXCLUDABILITY
no one can be denied a public good
2) NON RIVALROUS
one persons use will not affect the other person or diminish his benefit from it.
3) NON REJECTABILITY
no one can reject you from a public good
4) ZERO MARGINAL COST
The cost of providing it to an extra individual is negligible.
Has Free Rider problem. Price cannot be charged so incase of market failure government has to provide public goods.
What is merit good and its characteristics?
a commodity or service, such as education, that is regarded by society or government as deserving public finance.
EXCLUDABLE (people who dont pay are excluded)
RIVALROUS ( one person may take ur bad)
provide benefit to the society
