public good

Examples of public good in the following topics:

• Demand for Public Goods

  • The aggregate demand curve for a public good is the vertical summation of individual demand curves.
  • The aggregate demand for a public good is derived differently from the aggregate demand for private goods.
  • The marginal benefit of a public good diminishes as the level of the good provided increases.
  • Public goods are non-rivalrous, so everyone can consume each unit of a public good.
  • The aggregate demand for a public good is the sum of marginal benefits to each person at each quantity of the good provided .

• Optimal Quantity of a Public Good

  • To determine the optimal quantity of a public good, it is necessary to first determine the demand for it.
  • Often, the government supplies the public good.
  • The supply curve for a public good is equal to its marginal cost curve.
  • The public good provider uses cost-benefit analysis to decide whether to provide a particular good by comparing marginal costs and marginal benefits.
  • The optimal quantity of public good occurs where MB = MC.

• The Free-Rider Problem

  • The free-rider problem is when individuals benefit from a public good without paying their share of the cost.
  • It is easy to think about public goods as free.
  • However, even public goods need to be paid for.
  • Public goods, as you may recall, are both non-rivalrous and non-excludable.
  • National security is a public good: it is both non-rivalrous and non-excludable.

• Public Goods

  • A public good is a good that is both non-excludable and non-rivalrous.
  • Public goods can be pure or impure.
  • Impure public goods are those that satisfy the two conditions to some extent, but not fully.
  • Consumers can take advantage of public goods without paying for them.
  • A streetlight is an example of a public good.

• Causes of Market Failure

  • For example, although public education may only directly affect students and schools, an educated population may provide positive effects on society as a whole.
  • Lack of public goods: public goods are goods where the total cost of production does not increase with the number of consumers.
  • As an example of a public good, a lighthouse has a fixed cost of production that is the same, whether one ship or one hundred ships use its light.
  • Public goods can be underproduced; there is little incentive, from a private standpoint, to provide a lighthouse because one can wait for someone else to provide it, and then use its light without incurring a cost.
  • Underproduction of merit goods: a merit good is a private good that society believes is under consumed, often with positive externalities.

• Defining a Good

  • Private goods: Private goods are excludable and rival.
  • Club goods: Club goods are excludable but non-rival.
  • Public goods: Public goods are non-excludable and non-rival.
  • Examples of public goods include the air we breathe, public parks, and street lights.
  • Public goods may give rise to the "free rider problem. " A free-rider is a person who receives the benefit of a good without paying for it.

• Private Goods

  • In economics, a private good is defined as an asset that is both excludable and rivalrous.
  • Generally, people have to pay to enjoy the benefits of a private good.
  • Because people have to pay to obtain it, private goods are much less likely to encounter a free-rider problem than public goods.
  • In daily life, examples of private goods abound, including food, clothing, and most other goods that can be purchased in a store.
  • An ice cream cone is an example of a private good.

• Cross-Price Elasticity of Demand

  • For substitute goods, as the price of one good rises, the demand for the substitute good increases.
  • Conversely, the demand for a substitute good falls when the price of another good is decreased.
  • Two goods that complement each other have a negative cross elasticity of demand: as the price of good Y rises, the demand for good X falls.
  • Two goods that are substitutes have a positive cross elasticity of demand: as the price of good Y rises, the demand for good X rises.
  • Two goods that are independent have a zero cross elasticity of demand: as the price of good Y rises, the demand for good X stays constant.

• Economics as a Study of the Allocation of Scarce Resources

  • What goods and services should be produced?
  • Since not everything can be produced, some goods must be sacrificed for other goods.
  • There are often different ways to produce a good.
  • The amount of the good to be produced may influence the ways in which a good is produced
  • The distribution of goods among the members of society may also influence the ways in which different goods are valued.

• Market Demand

  • The demand schedule represents the amount of some good that a buyer is willing and able to purchase at various prices.
  • In general, this means that the demand curve is downward-sloping, which means that as the price of a good decreases, consumers will buy more of that good.
  • A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at every different price.
  • However, special cases exist where the preference for the good or service may be perverse.
  • Two different hypothetical types of goods with upward-sloping demand curves are Giffen goods (an inferior but staple good) and Veblen goods (goods characterized as being more desirable the higher the price; luxury or status items).