23115 Lecture Notes - Lecture 5: Private Good, Public Good, Social Dilemma
Document Summary
Public goods and common resources: private markets fail to provide the proper amount of the good so a role of government intervention arises, different kinds of goods. Excludable = person can be prevented from using the good. Rival = one persons use diminishes the amount available for others. Public good = not excludable, not rival (free air television: public goods. Free riding = social and private incentives are not equal. Problem of a positive externality (who provides the good is not compensated by those who benefit from it) The government can remedy the problem by using tax revenue to pay: common resources. Rival goods (natural resources - wild life, clean air) Tragedy of the commons common resources are exploited/overused. Used more than desirable from standpoint of society as a whole. Known as a social dilemma (eventually resource depletes) Arises because of a negative externality (market produces too much)