Public goods
Non-rival and non-excludable.
Public goods
Key definitions
Non-rivalry
One person's use does not reduce availability to others.
Non-excludability
Cannot stop non-payers from consuming.
Free-rider problem
People consume without paying — underprovision.
Quasi-public goods
Have one characteristic of public goods.
Market failure
Private sector underprovides.
Defence
Classic public good example.
Street lighting
Non-rival once provided.
Lighthouse
Difficult to exclude ships from benefit.
State provision
Government may supply public goods.
Key concepts
Free-rider problem means private firms lack incentive to supply pure public goods.
Defence and street lighting illustrate non-excludability.
Government provision corrects missing markets.
Relevant tips
- Explain both characteristics for full definition marks.