EC120 Lecture Notes - Lecture 17: Private Good, Excludability, Externality

• School: WLU
• Department: Economics
• Course: EC120
• Professor: All

Document Summary

Excludability: the property of a good whereby a person can be prevented from using it: ex. Big macs, wireless internet access (password protected: not excludable examples: fm radio signals, naional defence. Rival in consumpion: the property of a good whereby one person"s use diminishes other people"s use: rival: big macs, not rival: an mp3 ile of kanye"s latest single. Diferent kinds of goods: externaliies arise for both public goods and common resources because something of value has no price atached to it, private decisions about consumpion and producion can lead to an ineicient outcome. Public goods: non-excludable and not rival in consumpion. Naional defence, knowledge: diicult for private markets to provide because of the free-rider problem, free-rider: a person who receives the beneit of a good but avoids paying for it. These are imprecise, so the eicient provision of public goods is more diicult than that of private goods. Role for government: seeing that they are provided: rival in consumpion.