Chapter11+JDEM





=**INTRODUCTION:**= ==== The buyers pay for the goods that they buy. The sellers earn an income for whatever they sell. It sounds like a fair trade doesn’t it? However there are ways to avoid the “buying” part. When certain goods can be given for free, market forces that distribute resources in the economy are gone. The idea of “fair trade” is thrown off scale. We will explore the problems of allocating resources dealing with goods without market prices. ====



// **The Four Types of Goods Revealed: What are the Differences or Are There?:** //
First, let’s think about two things: are the good excludable, where other people are prevented from using them? Is the good rival in consumption,where someone using it gives the other one less ability to use it? These are the kinds of questions that are asked when determining which goods go into one of the four categories. The four categories are Private Goods, Public Goods, Common Resources, and Natural Monopolies.

Private goods are excludable and rival in consumption. Public goods are neither excludable nor rival in consumption. Common resources are rival in consumption, but not excludable. Finally, there are the natural monopolies. They are excludable, but not rival in consumption. We can see many similarities and also some differences yes? That’s right. However even though it seems these categories are pretty organized, they are only vague and not-too-detailed facts. Meaning these are not the official categories that work 100%.

//**// **How to Eliminate the Free Rider Problem** //**//
There is a term called the “free riders” or who I like to call the “free loaders”. Basically they are the same thing. They both like to help themselves to free stuff and take advantage of it.

Let’s say that you decided to have a bake sale and give out a free cookie to people as a free sample. You give them cookies to stick around hoping they would buy more. However people catch on quickly that they don’t need to stay to get something out of the bake sale. So people just come for the free cookies and you make no profit. This is how a free rider is born. They see that they don’t need to do extra work or pay in order to certain goods.

A solution to this could be to give out free cookies to only the people who buy them. The free-bees should go to the people who are actually interesting in what you have to sell. Or if you are trying to get the people to buy your goods, giving out free cookies is not necessary, when you could try other forms of advertisement.



**The Cost-Benefit Analysts: How Hard They Have to Work for Society:**
Let’s say that the government wants to build something for the community, such as a new highway. Before they build it, they must first think about how much it will cost, how much more it will cost to care for it, how they will care for it, and so on. The hire Cost-Benefit Analysts do a cost-benefit analysis. It’s a study that compares the costs and benefits for society to produce a good.

What makes their job hard is that the highway will not be excludable to people, so there is no price they need to put for its use. If they were to ask people how much they value the highway, it would be harder for them to do their jobs. People who are interviewed will most likely not tell the truth. People who would want the highway built would talk about how great it would be for society to have it. People will talk more than they have to, as an incentive to have the highway built. Some people who would not want it built would talk too much about how bad it would be for society. They do that as an incentive to not get it built if they don't like the idea. That is one way the cost-benefit analysts have a hard time.

=**Conclusion:**= ==== //There are some goods in the market that they do not provide well. Sometimes goods are not beneficial to the people because markets do not fix them. Remember we learned that in ch. 10? These problems arise because property rights are not as well enforces as they should be. Markets do not allocate their resources efficiently as a result of that. The government can fix this by defining property rights and releasing market forces. They can regulate and control such as we learned in chapter 10. Basically if there is a policy set up that will prove to be successful, it will allocate resources well and make it more efficient.// ====



**1. If one person’s use of a good diminishes another person’s enjoyment of it, the good is** a. rival. b. excludable. c. normal. d. exhaustible.

a. natural monopolies and public goods. b. public goods and common resources. c. common resources and private goods. d. private goods and natural monopolies.
 * 2. Goods that are rival include both**

a. excludable and rival. b. excludable and nonrival. c. nonexcludable and rival. d. nonexcludable and nonrival
 * 3. Frenchfries are**

a. cellphone b. macbook c. itouch d. limewire
 * 4. Which of the following would NOT be considered a private good?**

a. fireworks b. tornado sirens. c. bedsheets d. central park click here to check your answers
 * 5. An example of a private good would be**

//**// **Glossary** //**//
Private goods-excludable and rival in consumption. Public goods- neither excludable nor rival in consumption. Common resources- rival in consumption, but not excludable. Natural monopolies- excludable, but not rival in consumption. Free rider- they like to help themselves to free stuff and take advantage of it, without paying. Cost-benefit Analysis- a study that compares the costs and benefits for society to produce a good.