1.3.3 public goods

• private goods are characterised by rivalry and excludability
• rivalry = consumption by one individual reduces the availability of good for others
• exlcludability = when producers can prevent individuals from consuming the goof if they do not pay for it
• public goods are characterised in non-rivalry and non-excludability
• non-rival consumption is when one individual does not reduce the availability of the good for others
• non-excludability is difficult or costly to prevent individuals from benefiting from the goods regardless of wether they pay for it or not
• example of a public good is national defence the government provides defence and all citizens benefit as it is challenging to exclude non-payers from this benefit
• the free rider problem occurs when individuals benefit from a public goof without paying for it
• the free ride problem : it is difficult to exclude non-payers as individuals may choose not to pay for good bc it is already being payed for by others