Question

In: Finance

Explain the concepts and compare them with examples Private good Pure Public good Impure Public good...

Explain the concepts and compare them with examples

Private good

Pure Public good

Impure Public good

In which of the above categories will you place Indian railways. Give reasons for your answer.


Solutions

Expert Solution

1. Private goods - These goods are to be bought in order to be consumed.It is a product that must be purchased by individual or group of individuals and consumption by one individual prevents others from consuming it. The individual Who have bought the goods have the entitlement to consume it. Example like personal clothes and foods

2. Pure public goods- These goods are available to public for consumption and they are perfectly non rival in consumption and non excludable. This means that individual cannot be fully excluded from it's use and use by one individual doesn't limit availability to others.

Example like Free public parks and streetlights

3. Impure public goods- These are the goods which have a few of characteristics of public goods but not completely non rivalrous or non excludable .It may be non excludable but can become congested or it may be non rivalrous but still exclusion is possible.

Indian railways are impure public goods as it is excludable as it can restrict access to people who have not paid for it. It is non rival as it can be used by different consumers at the same time but one has to pay for it. So, Indian Railways is an example of Impure public goods.


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