Chapter 4-Public Goods Public economics
1 Chapter 4 - Public Goods Public Economics
Public goods defined Pure public goods share two characteristics Nonrival-Cost of another person consuming the good is zero Nonexcludable -Very expensive to prevent others from consuming the good
2 Public Goods Defined • Pure public goods share two characteristics – Nonrival – Cost of another person consuming the good is zero – Nonexcludable – Very expensive to prevent others from consuming the good
Examples of public and private goods Public Goods Private goods National defense zza House cleaning in an Health care apartment with many roommates Congested freeway Public housing Fireworks display Music file sharing Uncongested freeway
3 Examples of public and private goods • Public Goods – National defense – House cleaning in an apartment with many roommates – Fireworks display – Music file sharing – Uncongested freeway • Private goods – Pizza – Health care – Congested freeway – Public housing
Valuation of public goods Everyone consumes same quantity of public good Marginal benefit of public good varies by person In the housecleaning example, different roommates value the clean apartment differently
4 Valuation of public goods • Everyone consumes same quantity of public good • Marginal benefit of public good varies by person – In the housecleaning example, different roommates value the clean apartment differently
Impure public goods Most goods that are thought of as public goods may not strictly satisfy the nonrival or nonexcludable assumption A scenic view is a public good without congestion, but the quality diminishes as more the number of sightseers increases Thus a scenic view becomes rival
5 Impure public goods • Most goods that are thought of as public goods may not strictly satisfy the nonrival or nonexcludable assumption. – A scenic view is a public good without congestion, but the quality diminishes as more the number of sightseers increases. – Thus, a scenic view becomes rival