ECON 200 Lecture Notes - Lecture 28: Excludability, Market Failure, Externality
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Econ 200 i lecture 28 public goods and common resources. Excludability: a person can be prevented from using a good: ex. Rival in consumption: one person"s use of the good diminishes another person"s possibility of using it: ex. Private goods: excludable and rival: ex. Public goods: not excludable and not rival: ex. Common resources: not excludable and rival: ex. Club goods: excludable and not rival: ex. Public goods and common resources create externalities. This is because they have value but no price because they"re not sold in the marketplace: public goods: positive externality, common resources: negative externality. This implies that market outcomes will be inefficient without government intervention or private resolutions to resolve externalities. Public goods are hard to provide in the private market because of the free-rider problem. Free-rider: a person who receives the benefit of a good but doesn"t pay for it.
