COMMERCE 1B03 Chapter Notes - Chapter 11: Private Good, Overconsumption, Externality
4 Feb 2014
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Microeconomics chapter 11 (public goods & common resources) Excludable - if a person can be prevented from using it. Rival in consumption if one person"s use diminishes others" use. Mp3 files of a new song non-rival. National security, knowledge created through basic research, fighting poverty. Fish & other wildlife, clean air and water, congested roads. Externalities arise from both public goods and common resources due to something of value having no price to it. Private decisions about consumption and production leads to an inefficient outcome. Public goods are difficult for private markets to provide due to free-riders. Free riders a person who receives a benefit of a good without having to pay for it. If the good is not excludable, people tend to become free riders. Firms can"t prevent non-payers from consuming the good. Results in good not being produced (even if buyers value good higher than cost providing it)
