Non-excludable and non-rival, underprovided in a free market because of the free-rider problem
Public goods examples
Street lights
Flood control systems
Public good components
Non-excludable - consuming the good does not prevent others from consuming it
Non-rival - the benefit others get from the good does not diminish if more people consume it
Free-rider problem
People who do not pay for the good still receive benefits from it, in the same way people who pay for the good do therefore businesses aren't willing to supply
Free-rider problem
Causes public goods to be underprovided by the private sector - they do not make a profit from providing the good since consumers do not see a reason to pay for the good
Marginal social benefit exceeds marginal private benefit
Causes welfare loss (and therefore market failure) through under provision
Private goods
Rival and excludable
Private good example
Chocolate bar
Quasi public goods
Have characteristics of both public and private goods i.e partial excludability, rejectability and non rivalry
Quasi public goods
Roads
Paths
Public goods are underprovided because it is difficult to measure the value consumers get from public goods, so it is hard to put a price on the good</b>
Governments provide public goods, and they have to estimate what the social benefit of the public good is when deciding what output of the good to provide
The quantity of public goods provided will be less than the socially optimum quantity
