Edexcel A Level Economics A:復(fù)習(xí)筆記1.3.3 Public Goods

Category: A-level課程, 教材筆記, 福利干貨 Date: 2022年9月26日下午4:10

Public Goods

A?public good?is substantially different to a?private good
Private goods?are goods which firms are able to provide to?generate profits. They can generate profits as these goods are?excludable?and?rivalrous
- The firm is able to?exclude?certain customers from purchasing their goods?through use of the price mechanism. If customers cannot afford to buy them, then they are?excluded
- Customers can also?compete?for these goods which are limited in supply and this?rivalry?helps to generate profits for firms

Public goods?are goods that are beneficial to society but which will not be provided by private firms due to the principles of?non-excludability?and?non-rivalry
- Non-excludability?refers to the inability of private firms to exclude certain customers from using their products. In effect, the price mechanism cannot be used to exclude customers e.g. street lighting
- Non-rivalry?refers to the inability of the product to be used up, so there is no competitive rivalry in consumption to drive up prices and generate profits for firms
- Therefore, governments will often provide these beneficial goods themselves, and so they are called?public goods
If firms decided to provide these goods anyway, it would give rise to what is called the?‘free rider’ problem
- This is a situation where customers realise that they can still?access the goods, even?without paying?for them
- If they are paying, they stop and continue to?enjoy the benefits. They are?‘free-riding’?on the backs of other paying customers
- Over time, any customers who are paying for the goods will stop
- At some point firms will cease to provide these goods and they will become?under-provided?in society

Exam Tip

Make sure that you know the difference between public goods and merit goods.?The key idea is that private firms will not provide public goods, so under-provision (or no provision) occurs in society.

On the other hand, private firms will provide some merit goods as they are able to make a profit on them. However, due to the profit incentive and high prices that firms charge, not all members of society will be able to afford these goods. So merit goods are also under-provided, but there is some provision of them.

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