Question

The boundaries between the four categories of goods discussed in Chapter 17 can be blurry. Using the two criteria of rivalry and excludability, try to put the following goods and services into one of the four categories:

-Wild bee colonies     -Fire fighting        -The extinction of smallpox through vaccination campaigns

-A pair of sneakers    -The water cycle -Microsoft OS software

Answer 1

Based on the criteria of rivalry and excludability, four categories can be created:

1. Non-rival and non-excludable: Public goods

2. Non-rival and excludable: Club goods

3. Rival and non-excludable: Common resources

4. Rival and excludable: Private goods

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In public goods, everyone has access, and the availability doesn't diminish. In club goods, though the availability doesn't diminish, people can be excluded from its usage. In common resources, no one can be excluded, but the availability is limited. In private goods, the availability is limited, and people can be excluded as well.

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Based on this distinction:

Wild bee colonies: Common resources

Fire fighting: Public goods

The extinction of small pox through vaccination campaigns: Public goods

A pair of sneakers: Private goods

The water cycle: Public goods

Microsoft OS software: Club goods