NFSC 100 Lecture Notes - Lecture 9: Ice Cream, Excludability, Externality
15 Dec 2015
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Ice cream: excludable since it"s possible to prevent someone from eating, rival because if one person eats, the other can"t: public goods: goods that are neither excludable nor rival in consumption, ex. Tornado siren: impossible to prevent anyone from hearing it, one person hearing it does not affect others: common resources: goods that are rival in consumption but not excludable, ex. Fish in ocean: when one catches, there are few for the others. Yet, it is difficult to stop fisherman from taking fish out of the entire water: club goods: goods that are excludable but not rival in consumption, ex. Fire protection: fire department can let a house burn down. Yet not rival since town has already paid for department so the cost for protecting small house is small. For both of these types of goods (public and common), externalities arise because something of value has no price.
