EC120 Chapter Notes - Chapter 11: Private Good, Market Failure, Excludability
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EC120 Full Course Notes
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Document Summary
When thinking about goods in the economy, we group them according to characteristics: Can people be prevented from using the good: excludability: the property of a good whereby a person can be prevented from using it. Does one person"s use of the good diminish another person"s ability to use it: rival in consumption: the property of a good whereby one person"s use diminishes other people"s use. Consider an ice cream cone: (excludable) can be prevented from someone to eat it and (rival in consumption) limited in supply. Fire protection in a small town: easy to exclude people by letting the house burn but once the firefighters are paid it is not difficult/costly to help an additional house. Fish in the ocean: limited supply but it is difficult to stop fisherman from taking more fish out is defended it is impossible from stopping anyone person from enjoying the defense.
