Market Failure

Public Goods

Contributors
Christian Bien Portrait_edited.jpg

Carys Brown

tutorial.png

one.png
How to define goods?
Slide1.jpeg

Goods can be excludable and rival. If goods are considered  excludable it means that producers provide the goods to buyers who pay for the benefit of the product. For instance, a cinema is an excludable product as only buyers who pay to see see the movie can enter. 


 Similarly, if goods are considered non-excludable, this means that means that producers cannot stop buyers from using the product. This means that 'free-riders' can benefit from the product without paying for the good. For example, a public road doesn't need people to pay for the good to use it. 


Goods can also be considered rival or non-rival. Non-rival goods mean that one consumers use of that good doesn't prevent someone else from benefitting from the good. An example of this is netflix, as more than one person can watch the same movie. Rival goods means that buyers consumption prevents others from using the same good. The best example of this is food becuase when it has been eaten, other people can benefit from the product. 

two.png
Public Goods
Slide2.jpeg

Public goods are non-rival and non-excludable. This means that consumers do not need to pay for the product, as well as allowing multiple people to benefit from the same product without preventing others from using the good. 

Examples of public goods include, public roads, lighthouses, footpaths or streetlights. 



Topic Menu
Causes of Market Failure
Market power
Market Failure - Uncompetitive Markets
Externalities
Externalities - Models
Public Goods
Common Resources
Students Walking Up Stairs_edited.jpg

Want your ATAR notes to empower over 77,000 students per year?

Logo-New-Large.png

Join the Team.
Empower Education.

three.png
Market Failure

Sign Up for Free to Read More 

Get instant access to all content and subscribe to our weekly email list on study tips, opportunities and other free resources. 

It only takes a minute...

Slide3.jpeg

Public goods are examples of market failure as providers of the product cannot make a profit. This means that no price can be set for the goods becuase they are provided for free. However, some public goods can be expensive to provide, for instance, streetlamps are expensive to run and set up, yet people benefit from them free of charge. 


Due to no economic return, providers may be reluctant to set up public goods. To ensure that goods are still provided governments may: 

  • Provide the goods themselves.

  • Organise with private companies to construct the goods under contract law. 

four.png
Slide4.jpeg
five.png
Slide5.jpeg
six.png
Slide6.jpeg
157-seven.png
Slide1.jpeg
156-eight.png
Slide8.jpeg