Common good

Examples of Common good in the following topics:

• The Tragedy of the Commons

  • The tragedy of the commons is the overexploitation of a common good by individual, rational actors.
  • Common goods are goods that are rivalrous and non-excludable.
  • This means that anyone has access to the good, but that the use of the good by one person reduces the ability of someone else to use it.
  • The tragedy of the commons is the depletion of a common good by individuals who are acting independently and rationally according to each one's self-interest.
  • Not all common goods, however, suffer from the tragedy of the commons.

• Defining a Good

  • Private goods: Private goods are excludable and rival.
  • Common goods: Common goods are non-excludable and rival.
  • Because of these traits, common goods are easily over-consumed, leading to a phenomenon called "tragedy of the commons. " In this situation, people withdraw resources to secure short-term gains without regard for the long-term consequences.
  • A classic example of a common good are fish stocks in international waters.
  • Club goods: Club goods are excludable but non-rival.

• Determinants of Supply

  • Supply is the quantity of a good or service that a supplier provides to the market.
  • Some of the more common factors are:
  • Prices of related goods: For purposes of supply analysis, related goods refer to goods from which inputs are derived to be used in the production of the primary good.
  • These regulations can affect a good's supply.
  • If the price of a good changes, there will be movement along the supply curve.

• "Market Failure" and Property Rights

  • With the presence of externalities, public or collective goods and common property resources, the information generated by market transactions may be distorted and incorrect signals result in misallocation of resources.
  • The use of a common property resource imposes costs on others in the society.
  • Buffalo, whales, "commons" and water quality are examples of common property resources.
  • Garret Hardin's article on the Tragedy of the Commons discusses the tradition of a common pasture in villages.
  • Each person can use the commons to graze their animal.

• Tariffs

  • Import tariffs: Taxes on goods that are imported into a country.
  • They are more common than export tariffs.
  • Export tariffs:Taxes on goods that are leaving a country.
  • When the tariff is imposed, the domestic price of the good rises to Pt.
  • When a tariff is levied on imported goods, the domestic price of the good rises.

• Imports: The Economics Impacts of Buying Goods from Other Countries

  • The domestic purchaser of the good or service is called an importer.
  • The price of a good or service will decrease while the quantity consumed will increase.
  • Imports provide countries with access to goods and services from other nations.
  • It is common for countries to import goods rather than a factor of production.
  • For example, the U.S. imports labor-intensive goods from China.

• Production Possibility Frontier

  • It is not possible to produce more of one good without decreasing the amount produced for the other good.
  • For example, if more of Good A needs to be produced, the amount of resources in use by Good B must be reduced and transferred to Good A.
  • The sacrifice in production of Good B is called opportunity cost.
  • When graphing PPF there are three types: the common, the straight line, and the inverted PPF .
  • A common PPF where there is an increase in opportunity cost.

• The Functions of Money

  • The monetary economy is a significant improvement over the barter system, in which goods were exchanged directly for other goods.
  • Barter is a system of exchange in which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money .
  • Absence of common measure of value: In a monetary economy, money plays the role of a measure of value of all goods, making it possible to measure the values of goods against each other.
  • Indivisibility of certain goods: If a person wants to buy a certain amount of another's goods, but only has payment of one indivisible good which is worth more than what the person wants to obtain, a barter transaction cannot occur.
  • It provides a way to quantify the value of goods and communicate it to others.

• Causes of Market Failure

  • Market failure occurs due to inefficiency in the allocation of goods and services.
  • Market failure occurs due to inefficiency in the allocation of goods and services.
  • Lack of public goods: public goods are goods where the total cost of production does not increase with the number of consumers.
  • Underproduction of merit goods: a merit good is a private good that society believes is under consumed, often with positive externalities.
  • Overprovision of demerit goods: a demerit good is a private good that society believes is over consumed, often with negative externalities.

• Defining Market Failure

  • The market will fail by not supplying the socially optimal amount of the good.
  • The imbalance causes allocative inefficiency, which is the over- or under-consumption of the good.
  • direct provision of merit and public goods - governments control the supply of goods that have positive externalities.
  • taxation - placing taxes on certain goods to discourage use and internalize external costs.
  • subsidies - reducing the price of a good based on the public benefit that is gained.