ECONOMICS Chapter Notes -Cable Piano Company, Public Good, Aggregate Demand
9 Dec 2021
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The goods that are characterized by both non-excludability and non-subtractability properties are called pure public goods. Non-rival consumption non-rival consumption means the consumption of one individual does not reduce the benefits derived by all other individuals. It implies that to derive the aggregate demand of the public good, individual"s demand curve must be added vertically rather than horizontally. National defense, air, fireworks display, knowledge, street lighting etc. are all examples of public goods. Non-excludability it implies that if the good is provided, one individual cannot deny another individual"s consumption of the good. In the provision of a public good like cable television, some houses may be excluded if the cable company refuses to hook up one more houses in their system. It means that there may be some public goods which may be rival but non-excludable or non-rival but excludable. All such public goods are called as impure or quasi-public goods.
