Chapter+11+Public+Goods+and+Common+Resources+(Joon,+Scott,+and+Steven)

Key Words:
 * excludablity:** the property of a porduct that a person can be prevented from using.
 * rivalry in consumption:** the property of a product that one person's use decreases the other people's uses.
 * private goods:** goods that are both excludable and rival in consumption
 * public goods:** goods that are both not excludable and not in rival for consumption.
 * common resources:**goods that are rival in consumption but not excludable.
 * free rider:** a person who receives benefit of a good/service without paying for it.
 * cost-bebefit analysis:** a study that compares the costs and benefits to society of providing a public good
 * tragedy of the commons**: a story that shows why common resources get used more than that is desirable from the society as a whole.

Intro: Buyers and sellers usually don't think about the externalities that are created by their decisions. In thinking about many different goods, it is best and useful if we classify the products. We classify the goods with two characteristics:
 * Excludability**- Can people be prevented from using the product?
 * Rival for Consumption?-** Is the product, if used by one person, reduces the availability for other people?

Using the two bolded categories, economists divides products in to four categories: **Private Goods**, **Natural Monopolies**, **Common Resources**, and **Public Goods**

1. Private goods(both excludable and rival in consumption) Examples: Ice Cream Clothing Ice Cream and Clothing are excludable because it's possible to prevent someone from eating/wearing them by simply not giving it to them. Also, if you eat/wear the ice cream/clothes, someone else cannot eat/wear; therefore, clothes and ice cream are rival for consumption!

2. Public Goods(Neither excludable nor rival in consumption) Examples: Tornado Siren National Defense People can not be prevented from **tornado siren** or **national defense**. They just both exist. Also, tornado siren and national defense is not rival for consumption because they both don't have a quantity which means one person using either of two does not reduce another person's chance of taking advantage of national defense or tornado siren. Just because I hear siren and I am protected by the government doesn't mean my neighbor can't hear siren or not be protected.

3. Common Resources (Not excludable but Rvial for Consumption) Fish in the River Trees in a forest

Fish in the River is a great example because people can not be prevented from fishing in the river. Anyone can go to the river and fish at anytime, making the fish in the river NOT excludable. But is still in rival for consumption. Because when you catch a fish, it leaves one less fish for the next person fishing from the river.

4. Natural Monopoly Examples: Cable TV Fire Protection

Fire protection is a natural monopoly because people can be excluded from it. For example, if there is a fire and the fire department does nothing and lets the house burn down, it's excluding the house owners from using the fire protection. But fire protection is not rival of consumption because the fire department doesn't limit the number of houses it can help.

Same with cable Cable TV. Cable TV companies can cut you off from using their service(usually happens when you don't pay the bills). But Cable TV is not in rival for consumption because the service is unlimited in terms of how many people.

Free Rider Problem:

A free rider is someone who benefits from the good/service but does not pay for it. Free Rider problem is when there are too many free riders and results in market ineffiency. Fireworks on the Fourth of July is a great example. Let's say someone was putting on firework, but to see the fireworks, people had to buy tickets worth ten dollars. But there were people who didn't pay and watched the fireworks from far away. Therefore, the person putting up the fireworks didn't think it was beneficial and ends up quitting the fireworks. But fireworks is a socially desired display. A solution can be government intervention. The government can pay for the fireworks. Because everyone, in theory, is paying for the fireworks through taxes.

Cost Benefit Analysis
 * The Cost Benefit Analysis is designed to estimate the total costs and the total benefits to weigh how efficient and effective a certain decision is.
 * E. g. Going to play with friends. You can use do Cost Benefit Analysis. Cost: 1) Have to stay up all night to do homework 2) Money for hangout Benefit: 1) Fun 2) Get to stay away from homework. Now you do a calculation if it's "worth it" to play with friends.
 * **Challenges**: Value is different for different people. For example, let's put mom and son, who wants to hang out as "economists." Referring to the previous example, mom may value her son doing homework more than playing. Therefore, the son and mom have different results in the Cost Benefit Analysis.

Tragedy of the Commons
 * Explains why common resources get used more than is desirable from the point of society as a whole.
 * *Important thing to Remember: When on uses a common resource, it reduces the enjoyment for the other people.
 * Possible Solution: Government Regulation or Tax

Important Common Resources: -can be fixed by corrective tax on pollution
 * Clean AIr and Water**

-Public or Common non-congested - public congested- common Solution: Charge toll
 * Congested Roads**

-Hard to find solution -international cooperation -ocean is too big.
 * Fish, Whales, and Other Wildlife.**

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