public goods

quasi public

can be excludable not rival though - doesn't diminsih/exhaust

public goods

defence judiciary and prison service police service street lighting

contain a small public good element

education and health

public goods/pure public goods

goods which possess the opposite characteristics to private goods - non rivalry: consumption of the good by one person does nor reduce the amount available for consumption by another person - sometimes this is down as non-diminishability or non-exhaustibility -non-excludability - once provided, no person can be exluded from benefitting; equally, no person can opt out of receiving the good, known as non-rejectability

to correct this market failure

governments tend to provide or organise the production of public goods

free rider problem

if the provision of public goods were left to the market mechanism, there would be market failure, this is due to the free-rider problem a public good is one where it is impossible to prevent others receiving benefits of the good once it has been provided little incentive for people to pay for consumption of the good a free rider is someone who receives the benefit but allows others to pay for it for instance, citizens receive benefits from defence expenditure. but individual citizens could increase their economic welfare by not paying for it in a free market, national defence is unlikely to be provided. a firm attempting to provide defence services would have difficulty charging for the product since it could not be sold to benefit individual citizens the result would be that no one would pay for defence and therefore market would not provide it the only way around this problem is for the state to provide defence and force everyone to contribute to its cost through taxation

the free rider problem

means that free markets do no provide enough or indeed any public goods, leading to market failure

problem of free riding can be solved for these non-pure/quasi-public goods ( goods which do not perfectly possess non rivalry and nonexcludability but are not perfectly rival or excludable

motorists can be made to pay a toll for using a road tv viewers can be made to buy subscriptions because reception is encoded ships entering a port can be forced to pay taxes for upkeep of local lighthouses however quasi-public goods possess second characteristic of pure public goods - they are non-rival. for most roads, one motorist won't exclude another from travelling on same road. when goods are non rival, it is unlikely free market mechanism will provide enough of good how many country roads would private firms provide if they were tolled - few because tolls collected would not cover building and maintenance of road strong case for government providing this quasi-public good

private goods

nearly all goods are private goods. a private good is rivalrous (consumption by one person results in the good not being available for consumption by another, if a firm builds a plant on a piece of land, that land is not available for use by local farmers). private goods are also excludable - once provided it is possible to prevent others from using it, e.g. football clubs can prevent fans from seeing a game at their stadium by allowing only ticket holders to enter

public goods

non rivalry non diminishability non exhaustibility non excludability non rejectability marginal cost is

public goods

possess the characteristics of non-rivalry and non-excludability

marginal cost

public goods are also different from private goods because the marginal cost, the extra cost, of proving a unit of the good is 0

in practice

there are often ways in which providers of public goods can exclude consumers from benefitting from public good (non-pure/quasi-public goods)

pure public goods

there are relatively few examples of pure public goods, although many goods contain a public good element clean air is a public good - non-diminishing, non-exhaustability, non-rejectability, nonrivalrous, non excludability defence is another example; an increase in uk population does not lead to reduction in defence for existing population. people cannot reject benefits even if they object to policy and refuse to pay. marginal cost of providing defence for one extra citizen is 0