1. Not so Private Goods and Services

2. Production of Goods Requires Scarce Resources
To produce an additional unit of one good, less of something else would be produced due to the allocation of resources
If the satisfaction of the new good is greater than it is considered efficient to produce that unit (net gain)

3. Example
Bushel of Wheat runs $6 Bushel of Corn runs $4 To grow wheat or corn one uses the same resources. In this case the added benefit of producing wheat over corn is $2 greater and so it is more efficient to produce.

4. Reminder Demand Curve
Shows how much consumers value or are willing and able to pay for each additional unit of a good

5. Reminder Supply Curve
Shows the minimum that producers are willing and able to accept to produce each additional unit.

6. Finding the Efficient Quantity
$/unit
Number of Units
Supply
Demand 30 20 10 $6
$12
$18

7. Added Value/Added Cost at 10 Units
$18 is the added value at 10th unit
$6 is the added cost
Would it be efficient to produce this good?

8. Which would be effient to produce and which would not be efficient?

9. It is efficient to produce all units of a good for which the demand (added value) curve is above the supply (or added cost) curve.
Efficient Quantity is where the value added=cost added

10. What is the efficient quantity in the graph below?

11. If the market were at equilibrium what would be the price and quantity produced?

12. Characteristics of Goods
Rival
A unit of the good cannot be consumed by more than one person at one time.
Excludable
People who do not pay for the good can be prevented from consuming it.

13. Rival Goods examples

14. excludable

15. Private Good Good or service whose use is both rival and excludable
Most Goods are private goods
Examples: bananas, cellphones, electricity, haircuts, fast-food, video games, auto repair, etc.

16. What if a good/service does not have these characteristics?
Activity 11.1
Given 10 tokens each
Box 1- each token earns 1 bonus poing
Box 2- depends on how many tokens are put in by the entire class. Multiply total amount by 2 and evenly divide throughout the class.
Eg. Box 2 = 30 >30x2=60/# students > bonus points

17. How Many?
How many bonus points would each of you get if everyone in the class put all of his/her tokens in Box 1?
How many bonus points would each of you get if everyone put all his/her tokens in Box 2?

18. Box 2 pays off twice as much as 1, Does that mean that Box 2 is the best choice for everyone? What would happen if one student put their tokens in box 1 and everyone else put theirs in box 2? There are advantages and disadvantages with both options

19. Fill out the slips

20. Add up the numbers
Compare Maximum able to achieve (Box 2 times 2) to actual numbers

21. Why did some of you not put any in Box 2?
Free Rider

22. Tokens-represent scarce resources
Boxes-represent two types of goods that could be produced with the scarce resources
Box 1-Private Good/Service
Box 2-Public Good/Service (non-rival, non-excludable)

23. Activity 11.2
Complete as a group

24. Streetlights the public good
Use is not rival (everyone can enjoy simultaneously)
Use is not exclusive (even non-payers can enjoy)

25. Other Examples of Public Goods?

26. Not all government goods/services are Public
Garbage Pickup
Schools
Water