Public vs. Private Goods
Summary
The video explains the concepts of excludability and rivalry in goods. Excludability refers to whether someone must pay to use something, while rivalry indicates whether one person's use affects another's. Goods can be categorized as private (both rivalrous and excludable), collective (non-rivalrous but excludable), common (rivalrous but non-excludable), and public (non-rivalrous and non-excludable), with examples ranging from cars to national defense. Understanding these distinctions helps in determining how goods are managed and supplied, often leading to government involvement in public goods provision.
Excludability and Non-excludability
Excludability is whether or not someone who didn't pay for a thing is allowed to use or has access to that thing. Nonexcludable things include public trash cans and public roads. Non-excludable items are accessible to all regardless of payment.
Rivalry and Non-rivalry
Rivalry refers to the idea that if one person uses something, it subtracts from another person's ability to use it. Non-rivalrous items, like broadcast television, can be used by multiple people simultaneously without affecting others. Examples of rivalrous items include food and clothing.
Private Goods, Collective Goods, and Common Goods
Private goods are both rivalrous and excludable, such as cars and computers. Collective goods are non-rivalrous but excludable, like payment for TV channels. Common goods are rivalrous but non-excludable, as seen in certain natural water resources.
Public Goods
Public goods are non-rivalrous and non-excludable, such as free broadcast TV and national defense. These goods are typically managed and supplied by the government due to the challenges of pricing and free rider problems.
FAQ
Q: What is excludability?
A: Excludability refers to whether or not someone who didn't pay for a thing is allowed to use or has access to that thing.
Q: Give examples of non-excludable items.
A: Examples of non-excludable items include public trash cans and public roads, which are accessible to all regardless of payment.
Q: What does rivalry refer to?
A: Rivalry refers to the idea that if one person uses something, it subtracts from another person's ability to use it.
Q: Provide examples of non-rivalrous items.
A: Examples of non-rivalrous items include broadcast television, which can be used by multiple people simultaneously without affecting others.
Q: What are private goods?
A: Private goods are both rivalrous and excludable, such as cars and computers.
Q: Describe collective goods.
A: Collective goods are non-rivalrous but excludable, like payment for TV channels.
Q: What are common goods?
A: Common goods are rivalrous but non-excludable, as seen in certain natural water resources.
Q: Explain public goods.
A: Public goods are non-rivalrous and non-excludable, such as free broadcast TV and national defense.
Q: Why are public goods typically managed and supplied by the government?
A: Public goods are managed and supplied by the government due to the challenges of pricing and free rider problems.
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