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G OODS THAT YOU CAN ’ T STOP PEOPLE WHO DON ’ T PAY FROM ENJOYING ARE GENERALLY PROVIDED BY THE GOVERNMENT G OODS YOU CAN STOP PEOPLE WHO DON ’ T PAY FROM ENJOYING ARE PROVIDED BY THE MARKET Does it rival in consumption or not rival in consumption? Is it excludable or non-excludable?
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PRIVATE GOODS VS. PUBLIC GOODSUnit Three: Microeconomics
BELL RINGER List 5 types of goods and services the
market (private sector) provides List 3 goods or services provided by the
government Why do you think the government provides
certain goods/services and not others?
GOODS THAT YOU CAN’T STOP PEOPLE WHO DON’T PAY FROM ENJOYING ARE GENERALLY
PROVIDED BY THE GOVERNMENT GOODS YOU CAN STOP PEOPLE WHO DON’T PAY FROM ENJOYING ARE PROVIDED BY THE
MARKET Does it rival in consumption or not
rival in consumption? Is it excludable or non-excludable?
A private good rivals in consumption -- one person’s use of it diminishes another person’s use.
Private Goods
Public goods do not rival in consumption, one person’s use of it DOES NOT diminishes others’ use.
Public Good
1. An excludable public good is one in which a person can be prevented from using it.
Two types of public Goods
2. With a non-excludable public good individuals cannot be excluded from consuming
Second type of public Goods
WHY WOULD I PAY FOR A NON- EXCLUDABLE GOOD? Non excludable goods are subject to free riders A free rider is a person who receives the benefits of a good without paying for it
Have YOU ever been a free rider?
COMMON RESOURCES Common resources are resources that rival in
consumption but are not excludable Non-excludable resources leads to the
“tragedy of the commons”
https://www.youtube.com/watch?v=4RE9PMwwaFc
DIFFERENT KINDS OF GOODSPrivate goods: excludable, rival in consumption
Excludable Public goods:excludable, don’t rival in consumption
Non-excludable Public goods: non-excludable, don’t rival
ARE ALL THE COSTS OF MAKING THE GOOD INCLUDED IN THE PRICE?Externalities
EXTERNALITIES An externality is an economic side effect of a
good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
POSITIVE EXTERNALITIES A positive externality is a beneficial side
effect of an action that is felt by other
NEGATIVE EXTERNALITIES A negative externality is an adverse side
effect of an act that is felt by others
Are all of the costs of a business “paid” by the business?
(http://www.huffingtonpost.com/2013/10/29/sriracha-odor-lawsuit-stinging-stench_n_4172997.html)
WHAT CAN THE GOVERNMENT DO ABOUT NEGATIVE EXTERNALITIES?Possible solutions to externalities
