Public oods and Common resources tt Chapter 11 Copyright C 2001 by Harcourt, Inc All rights reserved. Requests for permission to make copies of any part of t work should be mailed to Permissions Department, Harcourt College Publishers 6277 Sea Harbor Drive. Orlando Florida 32887-6777
Public Goods and Common Resources Chapter 11 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777
The best things in life are free. Free goods provide a special challenge for economic analysIs Most goods in our economy are allocated in markets for these goods, prices are the signals that guide the decisions of buyers and sellers H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. “The best things in life are free. . . ” Free goods provide a special challenge for economic analysis Most goods in our economy are allocated in markets… …for these goods, prices are the signals that guide the decisions of buyers and sellers
The best things in life are free When goods are available free of charge, the market forces that normally allocate resources in our economy are absent. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. “The best things in life are free. . . ” When goods are available free of charge, the market forces that normally allocate resources in our economy are absent
f The best things in life are free When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in the proper amounts. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. “The best things in life are free. . . ” When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in the proper amounts
The best things in life are free In such cases, government policy can potentially remedy the market failure that results and raise economic well-being H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. “The best things in life are free. . . ” In such cases, government policy can potentially remedy the market failure that results, and raise economic well-being
The Different Kinds of goods When thinking about the various goods in the economy, it is useful to group them according to two characteristics: o Is the good excludable ◆ Is the good rival? H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Different Kinds of Goods When thinking about the various goods in the economy, it is useful to group them according to two characteristics: u Is the good excludable? u Is the good rival?
The Different Kinds of goods ◆ Excludability People can be prevented from enjoying the good Laws recognize and enforce private property rights. Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Different Kinds of Goods uExcludability u People can be prevented from enjoying the good. u Laws recognize and enforce private property rights
The different Kinds of goods ◆ Rivalness ◆ One person’ s use of the good diminishes another person's enjoyment of it H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Different Kinds of Goods u Rivalness u One person’s use of the good diminishes another person’s enjoyment of it
Four Types of Goods ◆ Private goods ◆ Public goods ◆ Common resources ◆ Natural Monopolies H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Four Types of Goods uPrivate Goods uPublic Goods uCommon Resources uNatural Monopolies
Types of Goods ◆ Private goods cAre both excludable and rival ◆ Public goods Are neither excludable nor rival H arc Inc items and derived items copyright C 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Types of Goods uPrivate Goods uAre both excludable and rival. uPublic Goods uAre neither excludable nor rival
