Chapter+Eleven

=PUBLIC GOODS & COMMON RESOURCES =

We all like free things. In economics goods are usually paid for by the buyers and the sellers receive the pay. However when the goods are free, the market forces that drive the economy are not present which creates a special challenge. There is a challange because when a free good is present, one cannot control the consumption and production of the good. Goods are determined by their excludability and rivalry in consumption. From these two factors there come 4 categories by which goods are grouped by.

 Vocabulary: -**Excludability**: when a person can be prevented from using a good. -**Rivalry** **in consumption**: when one person's use of a good diminishes the other people's use. -**Private** **goods**: a type of good that is both excludable and rival in consumption. -**Public** **goods**: a type of good that is neither excludable or rival in consumption. -**Common** **resources**: are goods that have rivalry in consumption but are not excludable -**Free rider**: is a person who receives the benefit of a good but avoids paying for it. -**cost**-**benifit** **analysis**: is a study that compares the costs and benefits to society of providing a public good. -**tragedy** **of the** **Commons**: a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole.

//Goods are grouped into these 4 categories by seeing if they are excludable or if it is has rivalry in consumption.//

Public goods and Common goods cannot be prevented from being used, also these two are related to externalities. Externalities comeforth from private goods people recieve the benefit of the good without actually paying for them, meaning the goods are positive externalities. Also for common goods; when one person uses these goods a lot, the other people cannot use it as much, this is a negative externality.

The Difficult job of Cost-Benefit Analysis
This deals with judging the public good, comparing the total benefit of everyone using this good, and the needs for maintaining the good. The goal of this analysis is to estimate the total cost and benefits of the good to the society.

The Free-Rider problem
Free riders are people who get the benefits of the good without paying for it. Because it is "free" people have want to become free-riders rather than buyers, this means the market of the good cannot make efficient outcome.

The Tragedy of the Commons
This is just an example of the problem that comes from common resources. Because common resources are rival in production, it means that when one person is using it, it reduces other people's ability to use it. Due to the fact that people undermine this negative externality when when deciding to use the common resource, it results in an over usage. This problem deals with the social and private incentives of people.

Important Public Goods

 * -Basic research**
 * -Fighting poverty**
 * -National defense**

Important Common Goods

 * -Clean Air and Water**
 * -Congested Roads**
 * -Fish, Whales, other Wildlife**

media type="file" key="chp.11.mp3"
1. Gives at least one example of a common resource and a public good? 2. What determines which group a good is put into? 3. Which good gives a negative externality?
 * Practice questions:**

1. common resources: fish in the ocean, congested nontoll roads public goods: National defenses, tornado sirens 2. The excludabilty and if it has a rivalry in consumption. 3. common resources give negative externalities.
 * Answers:**