4 types of goods
private goods
public goods
common resources
natural monopolies
private goods
excludability & rivalry
ex: clothing & ice-cream
natural monopolies
excludability & non-rivarly
ex: BEL, BWS
Common resources
non-excludability & rivalry
ex: fish, forests, congested roads
Public goods
none (non-excludable & non-rivalry)
ex: public health, schools, parks, non-congested roads
define excludability
a person can be prevented from using it.
(property of a good/ own the good)
define rivalry
one person’s use diminishes other people’s use
(property of a good/ own the good)
public goods & common goods characteristics in common (3)
not excludable
no price attached to it
positive & negative externalities
free-riders (2)
people who receive the benefit of a good but avoid paying for it.
-the free-rider problem prevents the private market from supplying the good.
government can remedy the free-rider problem by:
If the government decides that the total benefits of a public good exceed its costs:
it can provide the public good
pay for it with tax revenue
and make everyone
better off.
