1. 3.3 notes

2. Public Goods Provided by gov’t, used by everyone Funded by taxes
Examples – street lights, national defense
2 characteristics: 1. can’t exclude anyone and 2. one person’s use doesn’t reduce usefulness to someone else

3. Market Failure
Can happen when people benefit or are hurt by something they are not part of
They are called positive externalities or negative externalities
Example: free rider that watches fireworks (positive) or pollution in air, water (negative)

4. Cont’d
We want to SPREAD positive externalities, sometimes through subsidies
Example: flu shots for free
We want to SLOW DOWN or STOP negative externalities
Example: taxing companies that pollute

5. Gov’t also…
Provides safety nets for people that may to too old or sick
Examples: medicare, medicaid, Social Security