ECON 1B03 Lecture Notes - Lecture 13: Excludability, Externality

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

So far, we have looked at markets for goods and services that are supplied by private firms. Now, what about goods and services supplied by public sector. Assume: consumers do not have to pay for these goods - they"re provided for use for. Problem with market for free goods is that market forces - prices - which normally. By governments free allocate resources are absent. Without prices, market can"t guarantee that good is produced and consumed in right amount. It"s useful to group goods and services by two characteristics: You can prevent someone from using/enjoying the good ----> ex. you can"t have a candy bar unless someone gives you one/sells you one. If one person is using/enjoying a good, ability of someone else to use/enjoy it"s diminished -----> ex. If i"m eating a candy bar you can"t eat the same one. Using these two characteristics, we can divide goods into four categories: private goods.