Class16_04

Class16_04 - 16/04/2008 Class Notes (covers part of Chapter...

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16/04/2008 Class Notes (covers part of Chapter 14 in the textbook) Class Outline Public Goods Public Goods Good, services and resources differ in the extent to which people can be excluded from consuming them. Def. Excludable Good A good, service, or resource is excludable if it is possible to prevent a person from enjoying its benefits. Def. Nonexcludable Good A good, service, or resource is nonexcludable if it is impossible to prevent a person from enjoying its benefits. Def. Rival Good A good, service, or resource is rival if its consumption by one person decreases its consumption by other people. Def. Nonrival Good A good, service, or resource is nonrival if its consumption by one person does not decrease its consumption by other people. Goods are classified in 4 groups :
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Public goods create a free-rider problem because the quantity of the good that a person is able to consume is not influenced by the amount that the person pays for the good, so no one has an incentive to pay and an unregulated market would produce too little of the
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Class16_04 - 16/04/2008 Class Notes (covers part of Chapter...

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