Week%2011%20Session%202%202009

Week%2011%20Session%202%202009 - Microeconomics 1 Econ 1101...

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Unformatted text preview: Microeconomics 1 Econ 1101 Week 11 Public Goods and their Financing Economics of Information Text: Chps. 13 and 14 Outline: Public Goods; Definitions, Demand, Financing. Information Diane Enahoro Session 2 2009 1 Diane Enahoro Session 2 2009 2 Market Failure 2. Public Goods Characteristics of Private Goods 1) Rivalry in Consumption: 2) Exclusion Principle applies 3) MC of an extra consumer does not equal 0 Characteristics of Public Goods (Collective Goods) 1) Non Rival in Consumption 2) Exclusion Principle does not apply 3) MC of an extra consumer = 0 Diane Enahoro Session 2 2009 3 Rival in Consumption means one person consuming a good reduces the quantity that can be consumed by another. The Exclusion Principle means that a consumer who does not pay for the good can be prevented from consuming it. Marginal cost of an extra consumer = 0 means that it does not add to total costs to provide the good to one extra consumer. Examples of public goods are light houses and national defence. Common goods are goods which are rival in consumption but from which you can not exclude anyone who does not pay, e.g. fishing in the ocean, game parks Collective goods non rival in consumption but excludable e.g. pay TV Diane Enahoro Session 2 2009 4 The Demand Curve for a Public Good is the Vertical...
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Week%2011%20Session%202%202009 - Microeconomics 1 Econ 1101...

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