Chapter 9 - Information failure and public goods

• What is asymmetric information

  A situation where some participants within a market have better information about market conditions than others
• What's a Moral hazard

  A situation in which a person who has taken out insurance is prone to taking more risk
• What's adverse selection

  A situation in which a person at risk is more likely to take out insurance
• What are merit goods?

  Goods which are under consumed in a free market due to an undervaluation by consumers within the market
• What are demerit goods

  A good that brings less benefit to consumers than they expect, such that too much will be consumed by individuals in a free market
• What is the main benefit of social goods?

  They provide benefits to the community.
• How do social goods relate to individual consumption?

  They benefit the community without exclusive consumption.
• In what situation is it impossible to provide a product to one person?

  When it excludes others from consuming it.
• What happens to consumption when one person's consumption of a good does not prevent others from consuming it?

  It allows multiple people to consume the good.
• What is a key term related to the ability to consume goods?

  Non-excludability
• What does non-excludability mean in terms of goods?

  Goods cannot be restricted to individual consumption.
• How does one person's consumption affect the availability of goods for others?

  It does not affect the availability for others.
• What is the impact of one person's consumption on the total amount of goods available?

  It does not affect the total amount available.
• Can consumers be excluded from consuming a good?

  No, they cannot be excluded.
• What is the relationship between individual consumption and the availability of goods?

  Individual consumption does not limit availability.
• How do social goods affect the consumption behavior of individuals?

  They encourage shared consumption among individuals.
• Why can't consumers be excluded from consuming certain goods?

  Because they are available to everyone.
• What happens when a good is consumed by one person?

  It does not prevent others from consuming it.
• How does the concept of free-riding relate to social goods?

  People benefit without paying for the good.
• What is a characteristic of public goods?

  They are non-excludable and non-rivalrous.
• How do social goods contribute to community welfare?

  They enhance overall community benefits.
• What is the effect of one person's consumption on the total supply of a good?

  It does not reduce the total supply.
• How does the provision of social goods affect individual incentives?

  It may reduce the incentive to pay for them.
• What are the characteristics of social goods?

  • Non-excludable
  • Non-rivalrous
  • Benefit the community
  • Available to all individuals
• What are the implications of non-excludability in social goods?

  • Cannot restrict consumption to individuals
  • Encourages shared use among community members
  • Leads to potential free-riding behavior
• How do social goods impact individual consumption patterns?

  • Allow multiple individuals to consume simultaneously
  • Do not limit availability based on individual use
  • Encourage community-oriented consumption
• What are quasi public goods

  Public goods that do not exert all three characteristics of a public good (roads, football matches)