ECON 201 Lecture Notes - Lecture 5: Ice Cream, Excludability, Overconsumption

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7 Dec 2016
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Proper government responsibilities according to adam smith: regulating externalities, provide public goods. A good is rivalrous if one person consuming a good means that no one else can consume the good. A slice of pizza is rivalrous because only one person can eat it. A book is nonrivalrous because more than one person can read the same book. A good is excludable if it is possible to stop people from consuming a good. Again, pizza is excludable because the pizzeria will not give it to you until you pay for it. The military is not excludable: they protect the whole country from invaders. Private goods are produced and allocated most efficiently by competitive firms. Rivalrous, excludable goods are easily provided through private markets. People have an incentive to buy them: sellers can stop you from obtaining them if you do not buy them, you cannot easily free ride on the backs of people who do buy them.

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