CAS EC 101 Lecture Notes - Appendicitis, Counterexample, Overfishing
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CAS EC 101 Full Course Notes
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Document Summary
Some goods cannot be efficiently provided in private markets. A good or service is non excludable if it is very difficult or costly to prevent people from enjoying its benefits. If city streets are cleaned, there is no reasonable way to deprive people of those benefits. The owner of the cinema controls whether or not customers can enter. Firemen in tn watched as a house burned to the ground they refused to put out the fire because the owners hadn"t paid the fee to the fire company. Cost of exclusion: value of the house. Conclusion: if society is unwilling to allow houses to burn down, then fire- department services are non-excludable. If a good or service is nonexcludable consumers can obtain it without payment. Nonexcludable goods or services cannot be provided by firms in unregulated private markets. Consumers who obtain benefits without payment are called free riders .
