Public vs. Private Goods

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Presentation transcript:

Public vs. Private Goods

It is a good that is non-rivaled and non-excludable. Public Goods Good or service that is provided to society by the government (taxes) because it would be too impractical or too costly to make consumers pay individually and/or exclude non-payers. Examples: Roads, Space exploration, National defense, schools It is a good that is non-rivaled and non-excludable. Non-rivaled consumption: one individual does not reduce availability of the good for consumption by others Non-excludable consumption: no one can be effectively excluded from using the good.

Private Goods Food Clothing Ice cream cone Common Goods Water Fish Hunting Game Club Goods Cable TV Movies Public Goods National Defense Fireworks Air NPR

How are these public goods paid for? How to decide if the good or services is to be made public? The total benefits to society are greater than the total cost How are these public goods paid for? Taxes, of course. Free-rider A free rider is a person who benefits from an economic good or service but does not pay for it. Why still provide the good knowing that people will use it and not pay for it?