Public Goods Are Non-Rival Consumption Goods and Non-Excludable Goods

Topics: Public good, Externality, Market failure Pages: 4 (1172 words) Published: April 19, 2013
Name: Shashwat Mittal
Class: III C
Roll No.: 10/127
Tutorial Group: C14

Assignment 1
44. Two categories of public goods are non-rival consumption goods and non-excludable goods. Discuss the similarities and differences between these two types of goods. If a good is non-rival in consumption, does that mean that it is also non-excludable? If a good is non-excludable, does that mean it is non-rival in consumption? Why might the market produce non-rival goods inefficiently? Why might the market produce non-excludable goods inefficiently?

Answer: Public Goods have two characteristics-
Non-rival consumption- this implies that consumption by one individual does not reduce the benefits derived by any other individual. Non excludability- this implies that no individual can be excluded from consuming the good. Non-rival consumption goods are cinemas, parks, streetlights, air etc. Non excludable goods are fish stocks, national defense, free-to-air television etc. Similarity between Non-Rival Consumption goods and Non Excludable goods is that in both cases market fails to allocate these goods efficiently. In both cases it is difficult to determine the optimum price at which the good must be provided to the economy. Difference between them is that goods which are non rival it is possible for them to be excludable and non excludable goods can be rival. These points are explained below. Non-rival consumption goods may not be Non excludable. For example Cinemas, private parks, satellite television goods are non-rival in consumption but are excludable as it is possible to charge a price for using these goods and exclude those from using who are not willing to pay for them. Non Excludable goods may not be Non-rival in consumption. For example Common Property resources like water, timber, coal are goods which are non excludable but are rivalrous in nature as consumption by one individual reduces...
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