Ch 11 Public Goods(2)

Ch 11 Public Goods(2) - Ch. 11 Public Goods and Common...

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Ch. 11 Public Goods and Common Resources
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So far, we have looked at the markets for goods and services that are supplied by private firms. Now we turn our focus to goods and services supplied by the public sector. Consumers do not have to pay for these goods – they are provided for use for free by governments.
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The problem with the market for free goods is that the market forces – price – which normally allocate resources are absent. Without prices, the market can’t guarantee that the good is produced and consumed in the right amount.
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Different Kinds of Goods It’s useful to group goods and services by two characteristics. Excludability: people can be prevented from using the good or service. Example: You can’t attend a Buffalo Bills home game unless you have a ticket.
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Rivalry: one person’s use of the good diminishes the ability of another person to use it. Example: I park in a free lot, taking up a space that someone else might have wanted.
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Using these two characteristics, we can divide goods into four categories. 1. Private Goods These are both excludable and rival. Example: a chocolate bar It’s excludable: you can’t have one if no one will give or sell you one. It’s rival: if I’m eating one, you can’t eat the same one.
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2. Public Goods These are neither excludable nor rival. Example: fireworks displays They aren’t excludable: you can’t keep people from looking up into the sky and enjoying them. They aren’t rival: one person’s enjoyment of the show doesn’t take away from someone else’s enjoyment.
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These are rival but not excludable. Example: fish in the ocean They are rival: every fish you catch means fewer fish for the next person to catch. They are not excludable:
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Ch 11 Public Goods(2) - Ch. 11 Public Goods and Common...

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