Public Goods

• What is a public good?

  A good that is non-rivalrous and non-exclusive in consumption.
• What is an example of a public good?

  Street lighting
• What is a private good?

  A good that is rivalrous and exclusive in consumption.
• What is an example of a private good?

  Parking space
• What does rivalrous mean?

  Competitive
• What does non-rivalrous mean?

  Not-competitive
• What does exclusive/excludable mean?

  One’s consumption of a good is interfering with another‘s consumption of that good.
• What does non-exclusive/non-excludable mean?

  One’s consumption of a good is not interfering with another‘s consumption of that good.
• What are the examples of Quasi Public Goods?

  • Non-rivalrous & Excludable
  • Non-excludable & Rivalrous
• What is a quasi-public good?

  It is a near-public good. It has some of the characteristics of a public good.
• A public good may take on some of the features what?

  A private good
• What does semi-non-rival mean?

  More consumers using a beach does not reduce the space available for others, but eventually will become crowded.
• What does semi-non-excludable mean?

  It is possible but difficult or costly to exclude non-paying consumers. E.g. fencing a park or beach and charging an entrance fee; or building tall booths on conjested road routes.
• What is the Free-Rider Problem?

  When an individual cannot be excluded from consuming a good, and thus has no incentive to pay for its provision.
• What is the free-rider problem an example of?

  Market failure - exploiting the system
• How to overcome the free-rider problem?

  • Tax and government Provision
  • Appealing to the Public
  • Make a public good private
• Give details on tax and government provision as a way to overcome the free-rider problem?

  • Retrieve the costs of the good or service through higher taxes.
  • However, this may lead to tax avoidance/tax evasion is too high.
• Give details of appealing to the public as a way of overcoming the free-rider problem?

  • Asking consumers for small donations towards a public place that they frequently/want to keep ‘free’.
  • However, to depends on the size of the donation being asked. £4 for a public garden is reasonable but a voluntarily donation of £1000 for national defence.
• Give details on making a public good private as a way of overcoming the free-rider problem?

  • Ask for a fee for people to enjoy a ’public’ good.
  • However, it loses its features of being a public good. Leads to inequality. Lower income families suffer.