ECO 1104 Chapter Notes - Chapter 11: Peanut Butter Cup, Free Rider Problem, Private Good

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Rebekah Owusu

Document Summary

We examine problems that arise for goods w/o market prices. Elate to (cid:1005) of (cid:1005)(cid:1004) pri(cid:374)(cid:272)iples of e(cid:272)o(cid:374)o(cid:373)i(cid:272)s i(cid:374) ch. (cid:1005): go(cid:448)(cid:859)ts (cid:272)a(cid:374) so(cid:373)eti(cid:373)es i(cid:373)pro(cid:448)e (cid:373)arket out(cid:272)o(cid:373)es. Market failure: any situation in which unregulated markets fail to bring about a socially desirable outcome. Competitive markets usually yield desirable outcomes: efficiency, whereby output level is such that mb = mc. Thinking about various goods in the economy, it is useful to group them according to 2 characteristics: Is the good excludable: excludability: property of a good whereby a person can be prevented from using it. Is the good rival in consumption: rival in consumption: property of a good (cid:449)here(cid:271)y (cid:1005) perso(cid:374)(cid:859)s consumption infringes upon somebody else(cid:859)s (cid:272)o(cid:374)su(cid:373)ptio(cid:374) of the good. From these 2 characteristics, goods can be divided into 4 categories: private goods are both excludable & rival in consumption, so far we have studied private goods, which have 2 features, ex.