Question

When thinking about types of goods, what does ri

valry mean? What does excludability mean? What

are the four categories of goods we can identify us

ing those attributes, and what is an example of a

good in each category?

Answer 1

Rivalry -A good will be rival in nature if its consumption by one consumer prevents simultaneous consumption by other consumers meaning the consumption of a good by one person will reduce the consumption of that good for other.

Excludability - Agood is said to be excludable if it is possible to prevent consumers who have not paid for it from having access to it.

The four types of goods are

Private Goods

Private Goods are products that are excludable and rival. They have to be purchased before they can be consumed. Thus, anyone who cannot afford private goods is excluded from their consumption. Likewise, the consumption of private goods by an individual prevents other individuals from consuming the same goods. Therefore, private goods are also considered rival. Examples of private goods include: ice cream, cheese, houses, cars, etc.

Public Goods

Public goods describe products that are non-excludable and non-rival. That means, no one can be prevented from consuming them and they can be used by individuals without reducing their availability to other individuals. Examples of public goods include: fresh air, knowledge, national defense, street lighting, etc.

Common Resources

Common resources are defined as products or resources that are non-excludable but rival. That means, they can be used by virtually anyone. However, if one individual consumes common resources, their availability to other individuals is reduced. The combination of those two characteristics often results in an overuse of common resources (see also tragedy of the commons). Examples of common resources include: fresh water, fish, timber, pasture, etc.

Club Goods

Club goods are products that are excludable but non-rival. Thus, individuals can be prevented from consuming them, but their consumption does not reduce their availability to other individuals (at least until a point of overuse or congestion is reached). Club goods are sometimes also referred to as artificially scarce resources. They are often provided by natural monopolies. Examples of club goods include: cable television, cinemas, wireless internet, tollroads etc.