Question

A. Define a (i) private good; (ii) public good; and (iii) common resource.

B. What is a “free rider problem,” and what challenge does it pose for the private production of public goods and services?

C. How is the demand for a public good different from the demand for a private good?

D. Outline the role government plays in the provision of public goods.

Please use text to explain.

Answer 1

A) i) private good is the good which is excludable and rivalrous. This means if consumption of the good by one individual reduces benefits or quantity available to other individual for consumption. It is called rivalrous good. Also if individuals can be excluded from consuming it which is called excludability.

ii) public good is a good which is non excludable and non rivalrous. No individual can be excluded from consuming it and consumption by one individual does not reduce quantity available for other individuals.

iii) common resource is a resource which is non excludable that is everyone can use it but which is rivalrous that is consumption by one individual reduces the benefits or quantity available to other individuals.