Collective Good

Topics: Goods, Public good, Private good Pages: 3 (749 words) Published: June 24, 2013
Private goods
1. A private good is a good or service which a person will be excluded from owning or using if they do not pay for it. If you do not pay for items like food, cars or clothes you will be excluded from using them.

2. Consumption is rival (or depletable), and that they are excludable by price. If one person has the good or service, the benefits of it are not available to others, that is, it is rival or depletable. Individuals can only have the good or service if they pay for it, that is, a private good is excludable by price.

3. The market is good at producing private goods because firms are willing to produce the good or service that individuals desire because they can be charged for it, and the firms are able to make a profit. If private firms cannot charge for the good or service, they will not produce or provide the good or service because they have no way to make a profit.

Public goods
4. Once a public good is provided then it is impossible to stop someone else using the good or service. Examples of public goods are street lighting, public hospitals, public motorways, services of the police and navy.

5. If one person has the public good, it can also be available for others because no extra resources are required to let other people have the benefits of the good. This idea is known as non-rival)

6. Non-excludable by price means that once the public good is provided for one person, others are able to get the same benefits without having to pay. Individuals who do not pay cannot be excluded from using the public good. A person who does not pay taxes or rates cannot be stopped from using the footpath, motorway or local park.

7. The key characteristics of public goods are that they are non-rival (or non-depletable) and non-excludable by price.

The free-rider problem
8. Private producers are unlikely to provide public goods because of the free-rider problem. The free-rider problem is when someone refuses to contribute to the cost...
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