Question

Differentiate between private goods, pure public goods and impure public goods. Give one example of each. (approx 250 words)

Answer 1

The private products are competitor and excludable. Examples of private merchandise include food, clothes, and flowers. Such goods are typically restricted in quantity and owners or sellers may prohibit other people from enjoying their benefits. Most private goods are traded for payment, due to their relative scarcity. A private good is a frightening economic resource which creates competition for it. Consumers usually have to pay for receiving the rewards of a private good. Since people have to pay to get it, private goods are much less likely than public goods to experience a free-rider problem. Thus, the market must typically allocate capital effectively for the production of private goods.

Examples of private goods abound in everyday life, including food, clothes, and most other items that can be purchased in a shop. Take an ice-cream cone for example. This is both competitor and excludable. You may stop anyone eating the ice cream by actually refusing to sell it to them. Furthermore it can only be eaten once, and one person's intake will certainly reduce the ability of others to consume it.

A public good is both a non-excludable and a non-rivalrous product. That means that individuals can not be completely excluded from their usage, and one person's use does not limit their availability to others. Fresh air, information, lighthouses, national security, flood control systems and street lighting are examples of public goods.

Public goods can be either pure or impure. Pure public goods are those where consumption is ideally non-rivalous and non-excludable. Impure public goods are those that partially, but not entirely, meet the two requirements. Public goods production results in favorable externalities for which suppliers are not getting full payment. Consumers should deprive themselves of public goods without charging for them. That is called the "free-rider problem." "If so many consumers want to 'free-ride,' the private costs to suppliers will outweigh the private benefits and there will be no incentive to deliver the products or services to the market.