Lecture Notes - Public Goods

Lecture Notes - Public Goods - Public Goods (chapter 4) 1....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Public Goods (chapter 4) 1. The Characteristics of Public Goods (1) Non-rivalry : A given quantity of a public good can be enjoyed by more than one consumer without decreasing the amounts enjoyed by rival consumers. (2) Non-exclusion : You cannot take the good away or prevent its consumption. (3) These two imply that all consumers consume the same amount of public good. (4) Many goods have varying degrees of non-rivalry and non- excludability. Goods and services can be divided into four categories: Pure private goods Price-excludible public goods Congestible public goods Pure public goods 2. The Demand for a Pure Public Good The market demand curve for a pure public good gives the sum of quantities demanded by all consumers at each possible price. D 1 = MB 1 D 2 = MB 2 D N = MB N D = 1 N i i MB = 3. Efficient Output of a Pure Public Good 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
MSB = MB = MSC Example: Security provision in a community of three people MC = $450 MB 1 = 350 – 50G MB 2 = 300 – 50G MB 3 = 250 – 50G Efficient number of security guards: MSB = MSC MB 1 + MB 2 + MB 3 = MSC 900 – 150G = 450
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Lecture Notes - Public Goods - Public Goods (chapter 4) 1....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online