Intro to Microeconomics_Agnello_Date_042210

Intro to Microeconomics_Agnello_Date_042210 - Private Goods...

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Private Goods - Excludability and rival - Most goods like this with no externalities of any kind, the government can let the invisible hand do everything - i.e. solution is optimal (efficient) - Easy to evaluate non payers - no free riders - Thus people who want private goods will pay for them otherwise they won’t get them - The market will have the money to provide these goods up to the efficient (equilibirum) amount Public Goods(No/No part of block) - Neither excludible nor rival - Why would anyone pay for road use? - Can use the road regardless of paying - Free rider problem - everybody free rides and no one pays - Therefore private market firm can’t make any money - Goods bankrupt - Government must provide - When government provides public goods like national defense, courts, freeways, etc problems arise - How much should be provided? - No prices to guide the supply decision - Cost/benefit analysis difficult - Often politically determined - For non rival goods - The market demand curve is somewhat different - Recall that for private (rival) goods market demand is horizontal additions over individuals - But for a non rival public good the market (i.e total) demand is the vertical addition over all the
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Intro to Microeconomics_Agnello_Date_042210 - Private Goods...

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