In economics, a public good refers to a commodity or service which is created available to all members of a society. Usually, those services are administered by governments and paid for collectively through taxation. The examples of public goods include national defense, law enforcement, and the rule of law. Also, public goods refer to more basic goods, such as access to clean air and drinking water.
By the way, which is a critical rule for determining whether something is a public good?
- The advantage to each individual who uses the facility is greater than the cost.
- The advantages of the facility are greater for the society than for the individuals using it.
- The total advantages to society are greater than the total cost.
- The total of cost is small for each individual taxpayer.
The answer is ‘D’, the total advantages to society are greater than the total cost.
We have some questions and answers that you can learn to increase your Economic knowledge. Here are they:
- What best describes the role of government in a free enterprise system?
- Control business activities.
- Decide what companies are going to be formed and let the managers to run them.
- Allow individuals to operate their businesses in ways they think are going to maximize their profits.
- Require companies to disclose information to consumers.
The answer is ‘C’, allow individuals to operate their businesses in ways they think are going to maximize their profits.
- Select the term: Goods and services provided by the government for free or at greatly reduced prices
- macroeconomics
- poverty threshold
- private sector
- in-kind benefits
The answer is ‘D’, in-kind benefits.
- Which program gives enforcement of civil rights laws?
- Consumer Product Safety Commission
- Unemployment Insurance
- Temporary Assistance for Needy Families
- Equal Employment Opportunity Commission
The answer is ‘D’ Equal Employment Opportunity Commission.
- Which is a private organization which attempts to influence public officials to act or vote in ways that will benefit the group’s members?
- market research group
- free enterprise group
- public policy group
- interest group
The answer is ‘D’, interest group.
- Select the term: Government aid to the poor.
- market failure
- business cycle
- public policy
- welfare
The answer is ‘D’, welfare.
- Select the term: The study of the behavior and decision creating of entire economies.
- macroeconomics
- free rider
- poverty threshold
- private sector
The answer is ‘A’, macroeconomic.
- Select the term: The part of the economy that involves the transactions of individuals and businesses.
- macroeconomics
- free rider
- poverty threshold
- private sector
The answer is ‘D’, private sector.
- Select the term: Laws and standards on topics of public interest.
- market failure
- business cycle
- public policy
- externality
The answer is ‘C’, public policy.
- Select the term: An income level below that which is needed to support families or households
- macroeconomics
- poverty threshold
- private sector
- poverty threshold
The answer is ‘D’, poverty threshold.
THE DEFINITION OF A PUBLIC GOOD
Economists own a strict definition of a public good. It does not always include all goods financed through taxes. To understand the defining characteristics of a public good, firstly you have to consider an ordinary private good, like a piece of pizza. A piece of pizza is able to be bought and sold fairly easily as it is a separate and identifiable item. But, public goods are not separate and identifiable in this way. Instead, public goods own two defining characteristics. They are non-excludable and non-rivalrous.
HOW PUBLIC GOODS WORK
The two main criteria which distinguish a public good are that it must be non-excludable and non-rivalrous. Simply, Non-rivalrous means that the goods do not reduce in supply as more people consume them. While non-excludability means that the good is available to all citizens. Now, let us talk more detail about the two characteristics of public good.
The first characteristic of a public good is nonexcludable. It means that it is costly or impossible to exclude someone from using the good. If Larry buys a private good like a piece of hamburger, then he is able to exclude others, like Lorna, from eating that hamburger. But, if national defense is being provided, then it includes everyone. Even, if you disagree strongly with America’s defense policies or with the level of defense spending, the national defense will protect you. You will not be able to select to be unprotected, and national defense cannot protect everyone else and exclude you.
The second characteristic of a public good is nonrivalrous. It means that when one person uses the public good, another is also able to use it. With a private good like hamburger, if Max is eating the hamburger, then Michelle cannot also eat it, the two people are rivals in consumption. With a public good like national defense, Max’s consumption of national defense does not reduce the amount left for Michelle, so they are nonrivalrous in this case.
You have to know that a number of government services are examples of public goods. For example, it will not be easy to give fire and police service so that some people in a neighborhood will be protected from the burning and burglary of their property, while others will not be protected at all. Remember that protecting some necessarily means protecting others too.
Public goods and Positive externalities are closely related concepts. Public goods own positive externalities, like police protection or public health funding. Not all goods and services with positive externalities, but they are public goods. Investments in education own large positive spillovers but can be provided by a private company. Private companies are able to invest in new inventions such as the Apple iPad and earn profits that may not capture all of the social benefits.
