Public goods
Non- rivalrous
Consumption by one consumer does not restrict consumption by other consumers - in other words the marginal cost of supplying a public good to an extra person is zero. If it is supplied to one person, it is available to all.
Why are public goods an example of market failure?
Pure public goods are not normally provided by the private sector because they would be unable to supply them for a profit. It is up to the government to decide what output of public goods is appropriate for society. To do this, it must estimate the social benefits from making public goods available.
Non- excludability
The benefits derived from pure public goods cannot be confined solely to those who have paid for it
Non-rejectability
The collective supply of a public good for all means that it cannot be rejected by people, a good example is a nuclear defence system or flood defence projects.
Evaluate the role of the government in the provision of a public good
They provide it on the grounds of: 1. Equity 2. Efficiency 3. To overcome the free rider problem 4. To overcome the market's lack of provision of public goods
Public good
non-rivalrous and non-excludable
Free rider problem
occurs when those who benefit from resources, goods, or services do not pay for them, which results in an under-provision of those goods or services
Private good
rivalrous and excludable
Quasi public good
these are goods which have an element of non-excludability and non-rivalry, roads are a good example
