CHAPTER 16 PUBLIC GOODS ANDTAX POLICY
CHAPTER 16 Public Goods and Tax Policy
Goods Classifications ■ Excludab|e can prevent people from consuming without paying Rival in consumption can not be consumed by more than one person at the same time
Goods Classifications: ◼ Excludable – can prevent people from consuming without paying ◼ Rival in consumption – can not be consumed by more than one person at the same time
Four types of goods a Private goods excludable and rival in consumption a Collective goods(Artificially scarce goods excludable and non -rival in consumption Commons goods(common resources non-eXcludable and rival in consumption a Public goods non-excludable and non- rival in consumption
Four types of goods ◼ Private goods: – excludable and rival in consumption ◼ Collective goods (Artificially scarce goods): – excludable and non-rival in consumption ◼ Commons goods (common resources): – non-excludable and rival in consumption ◼ Public goods: – non-excludable and non-rival in consumption
Four types of goods Rival in consumption Nonrival in consumption Private goods Artificially scarce goods Excludable. Wheat Pay-per-view movies Bathroom fixtures Computer software Common resources Public goods No n- Clean water Public sanitation excludable Biodiversity National defense
Four types of goods
Goods Classification Rival Non-rival Excludable Private good Collective good (wheat) (pay-per-view TV) Non-excludable Commons good Public good (fish in the ocean)(national defense From Table 16.1, p 365
Private good (wheat) Collective good (pay-per-view TV) Commons good (fish in the ocean) Public good (national defense) Rival Non-rival Non-excludable Excludable From Table 16.1, P.365 Goods Classification
HW5 Explain the characteristics of the 4 types of goods 4 types: private; collective; common public List 5 goods that belong to each of the 4 types and explain
HW5 ◼ Explain the characteristics of the 4 types of goods ◼ 4 types: private; collective; common; public ◼ List 5 goods that belong to each of the 4 types and explain
Private goods Excludable and rival in consumption Non-payers can be easily excluded Each unit consumed by one person means one less unit available for others the only goods that can be efficiently produced and consumed by market
Private Goods: ◼ Excludable and rival in consumption ◼ Non-payers can be easily excluded ◼ Each unit consumed by one person means one less unit available for others ◼ the only goods that can be efficiently produced and consumed by market
Collective Good (Artificially Scarce goods) Excludable but non-rival in consumption It is not really scarce: use by one person does not reduce its availability to others But it can be excludable: people who do not pay can be prevented from using it
Collective Good: (Artificially Scarce Goods) ◼ Excludable but non-rival in consumption – It is not really scarce: use by one person does not reduce its availability to others – But it can be excludable: people who do not pay can be prevented from using it
Artificially Scarce Goods Price of pay-per-VIew movie Deadweight loss $4 Q Quantity of pay-per-view movies watched An artificially scarce good is excludable and non-rival in consumption. It is made artificially scarce because producers charge a positive price but the marginal cost of allowing one more person to consume the good is zero
Artificially Scarce Goods An artificially scarce good is excludable and non-rival in consumption. It is made artificially scarce because producers charge a positive price but the marginal cost of allowing one more person to consume the good is zero
Common goods (Common resources Non-excludable and rival in consumption Non-payers cannot be easily excluded Each unit consumed by one person means one less unit available for others The problem of overuse- a user depletes the amount of the common resource available to others but does not take this cost into account when deciding how much to use the common resource
Common Goods: (Common Resources) ◼ Non-excludable and rival in consumption – Non-payers cannot be easily excluded – Each unit consumed by one person means one less unit available for others ◼ The problem of overuse - a user depletes the amount of the common resource available to others but does not take this cost into account when deciding how much to use the common resource