November 7 Lecture - November 7 2012 Public Goods Public and Private Goods can be divided into 4 different categories Excludable Non-Excludable Rival

November 7 Lecture - November 7 2012 Public Goods Public...

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November 7, 2012 Public Goods Public and Private Goods: can be divided into 4 different categories Excludable Non-Excludable Rival Private Good (candy bar, automobile, education) Common Property Resources (crowded freeway, fishery) Non-Rival Partial Public Good (eg. Information, music, trade secrets) Pure Public Good (clean air, group reputation) Economics is more about common property goods whereas public policies apply to the others -Supply and demand curves come into play in common property resources No particular reason you shouldn’t get to watch a movie as long as no one else is watching it; social cost: 0, but someone has to pay in order to pay for producers, actors, etc. Non-rival and non-excludable: available to everyone, problem is that it’s available to everyone and whether they pay or not, there’s no incentive to pay for it; over-consumption of rival good because it’s not excludable; underproduction of a good that’s not excludable A lot of what the government does is arranged for the production of public goods; something can be a pure public good whether it’s produced by the government or not (available to everyone and nobody has to pay for it) However a lot of what the government actually is available to do is private (eg: UVa-limits of
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