ECO 120 Lecture 14: Chapter 11
18 Oct 2016
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Document Summary
Characteristics of goods: a good is excludable if people can be prevented from using it. Ex: wifi: a good is rival in consumption if one person"s use of it diminishes another"s. Different kinds of goods: private - excludable, rival in consumption. Ex: food: public - not excludable, not rival. Ex: national defense: common resources - rival but not excludable. Ex: fish in the ocean: club - excludable but not rival. Public goods: difficult for markets to provide. Free-rider problem - person who receives the benefit of a good, but avoids playing with it. Result: good isn"t produced: if benefit exceeds the cost, government should provide for the good and pay with taxes, cost benefit analysis - study that compares the costs and benefits of providing a public good. Without prices it is more difficult to measure benefits. Common resources: not excludable, can"t prevent free riders from using, little incentive, rival in consumption.
