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Unformatted text preview: AS Micro Revision: Public and Private Goods What should the state sector of the economy provide? How much should be left to the private sector allocating scarce resources through the incentives of the price mechanism? Is the provision of public goods the most important reason for accepting the existence of government involvement in the economy? These questions revolve around the idea of public and private goods – please understand the key characteristics of public goods and why they might not be provided optimally by the private sector – giving government a role in financing them for our collective (social) benefit. Pure public goods have two characteristics 1. Non-rival – consumption of the good by one person does not reduce the amount available for consumption by another person. E.g. terrestrial television services provided by the BBC 2. Non-excludable – Where it is not possible to provide a good or service to one person without it thereby being available for others to enjoy – if you cannot exclude the non-payers, profit-motivated businesses...
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This note was uploaded on 02/08/2012 for the course STA 2021 taught by Professor Xu during the Spring '11 term at FIU.
- Spring '11