ECON 200 Chapter Notes - Chapter 19: Public Good, Overconsumption, Private Good
2 Mar 2015
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Excludable- a characteristic of a good or service that allows owners to prevent its use by people who have not paid for it. Excludability matters because it allows owners to set an enforceable price on a good. If you can"t prevent people from consuming something, they have little reason to pay for using it. Everyone who comes through the street gets the benefit, regardless of whether they"ve paid to put up the lights. You cannot prevent the person who didn"t pay from getting the benefit of the lamps. Excludability can be a matter of degree. Most roads are nonexcludable, but bridges and tunnels can be made excludable by setting up toll booths. Rival-in-consumption (rival)- the characteristic of a good for which one person"s consumption prevents or decreases others" ability to consume it. Rivalry has to do with whether or not a good is used up when someone consumes it. Private good- a good that is both excludable and rival.
