Lecture 12 - Public Goods and Common Resources 1. The...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1. The Different Kinds of Goods When thinking about the various goods in the economy, it is useful to group them according to two characteristics: Is the good excludable? Is the good rival? Excludability; the property of a good whereby a person can be prevented from using it. Rivalry; the property of a good whereby one person’s use diminishes other people’s use. Private Goods; Both excludable and rival. Public Goods; Neither excludable and nor rival. Common Resources; Are rival, but not excludable. Club Goods, Natural Monopolies; Are excludable but not rival. 2. Public Goods A free-rider is a person who receives the benefit of a good but avoids paying for it. Since people cannot be excluded from enjoying the benefits of a public good, individuals may withhold paying for the good, hoping that others will pay for it. The free-rider problem prevents private markets from supplying public goods. An example: Security service in a shopping mall.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Lecture 12 - Public Goods and Common Resources 1. The...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online