Question

Explain the differences between a public good and a private good.

b.

Explain the free rider problem. Write a short paragraph on a real life example of the free rider problem that you personally experienced.

Answer 1

Ans A. There are different types of goods that are consumed by the consumers. Public and private goods are such goods.

Public goods are those goods that are available to all masses free of cost. Whereas, private goods are the opposite of public goods. Private goods are only available to those who can afford them.

Public goods are provided by nature or Government for the benefit of all. As for private goods, they are provided by the profit-making companies for a price.

Public goods are non-rival and non-excludable. And private goods are rival and excludable.

Examples, public goods: Dams, public defense, public transport, etc. Private goods: Electronic goods, clothes, jewelry, etc.

Ans 2. Free Rider Problem

A free rider is a person who benefits from a good without ever paying for its use. The problem in this system occurs when the burden on the shared resource is exhausting its use over time. And when the people using it are not paying or expending any effort for its betterment and use. This problem occurs with public goods.

Examples, there is a lake in a village where they use water for different activities such as fields, cooking use, and more. The lake is an open-source and everyone makes use of it without paying for it. The problem will occur when the lake starts getting dirty and no one extends any efforts to clean it. They can't overuse it too.

Or let's take a household example, cooked food for the whole family, bought the ingredients, set the dining table, and then washed the dishes and the kitchen also. This is the typical example of the free-rider problem. Other family members contributed nothing to all of this.

Other examples are national defense, streetlights, dams, and more.