ECON 1B03 Chapter Notes - Chapter 11: Externality, Civil Defense Siren, Ice Cream Cone

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Usman Hannan

Document Summary

There are 2 characteristics: excludability: a person can be prevented from using it, rival in consumption: one person"s use diminishes other people"s use. Categories: private goods - excludable and rival in consumption (i. e. an ice cream cone; i can just not give it to you, or if i eat it you cannot eat it as well. Other examples include cable tv, uncongested toll roads) Free rider: a person who receives the benefit of a good but avoids paying for it (i. e. i can watch fireworks from my house instead of paying to watch them) May be socially desirable but not privately profitable. Prevents private market from supplying these goods, therefore government can by using tax revenue. To develop general knowledge (cannot be patented) Many firms will be free-riders on general knowledge and put all their time and money into developing new technological knowledge which can then be profited off of.