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15 Cards in this Set
- Front
- Back
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Rival Consumption
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If a good is used by one person, it cannot be used by another.
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Non-rival consumption
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Cases where one person's consumption does not prevent another person's consumption
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Exclusion
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The possibility of excluding people from consuming a good
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Pure Public Goods
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Goods for which there is no rivalry in consumption and non-excludabity
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Underconsumption and Undersupply
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Two basic forms of market failure associated with public goods.
Non-rival Goods - exclusion causes underconsumption Rival Goods - undersupply causes need for exclusion |
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User Fees
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Fees charges by government to users of goods on which exclusion is possible
*causes inefficiency in non-rival goods |
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Free Rider Problem
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The reluctance of individuals to contribute voluntarily to support of public goods
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Transaction Costs
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Costs associated with exclusion for private and public goods.
*relatively smaller for private goods, much larger for publicly provided goods |
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Publicly Provided Private Goods
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Publicly provided goods for which there is a large marginal cost associated with supplying additional individuals
*Education is an example |
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Rationing System
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Any method restricting consumption of a good
Methods commonly used: Prices Uniform provision Queuing |
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Uniform Provision
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Rationing System: Supplying the same quantity of the good to everyone
*example: same level of free education |
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Queuing
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Requiring waiting time to pay for access to goods
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Tax Price
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The extra payment an individual needs to make for each extra unit of a public good
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Marginal Economic Rate of Transformation
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The amount of private goods we have to give up to obtain one more unit of public goods, taking account extra costs associated with taxes required to finance increased public expenditure
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Marginal Physical Rate of Transformation
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The amount of private goods we have to give up to obtain one more unit of public good, which is completely determined by technology
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