Question

In: Economics

Explain how quasi-public goods are used by the 1% versus the 99%.

Explain how quasi-public goods are used by the 1% versus the 99%.

Solutions

Expert Solution

Quasi-public goods have characteristics of both private and public goods, including partial excludability, partial rivalry, partial diminishability and partial rejectability. Examples include roads, tunnels and bridges. Markets for these goods are considered to be incomplete markets and their lack of provision by free markets would be considered to be inefficient and a market failure.

For example, private enterprise could provide some bridges, roads and tunnels if a charging system could be applied which solves the free rider problem. However, it is unlikely that all an economy's (households and firm's) need for transport and infrastructure could be met this way. Indeed, toll charge systems could be regarded as inefficient in that traffic slows down to pay at the toll booth, and traffic builds up causing congestion and increased external costs. However, the introduction of new technology, such as 'smarter' payments systems and number-plate recognition technology means that the free rider problem can be reduced or eliminated and the price mechanism can operate. Hence, over time, technology can convert public goods to quasi-public goods, and eventually to private goods.

Quasi-public goods, yielding both public and private benefits, can be financed through the public or private sectors. Even when financed publicly, then can be provided through private management. Thus, we observe a wide range across countries in the public-private provision of these goods.

A quasi-public good is a near-public good. It has some of the characteristics of a public good especially when it becomes rival in consumption at times of peak demand.

The first characteristic, that a public good is nonexcludable, means that it is costly or impossible to exclude someone from using the good. If Larry buys a private good like a piece of pizza, then he can exclude others, like Lorna, from eating that pizza. However, if national defense is being provided, then it includes everyone. Even if you strongly disagree with America’s defense policies or with the level of defense spending, the national defense still protects you. You cannot choose to be unprotected, and national defense cannot protect everyone else and exclude you.

The second main characteristic of a public good—that it is nonrivalrous—means that when one person uses the public good, another can also use it. With a private good like pizza, if Max is eating the pizza, then Michelle cannot also eat it 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 area.

A number of government services are examples of public goods. For instance, it would not be easy to provide fire and police service so that some people in a neighborhood would be protected from the burning and burglary of their property, while others would not be protected at all. Protecting some necessarily means protecting others, too.

What are the main characteristics of pure public goods?

The characteristics of pure public goods are the opposite of private goods:

  1. Non-excludability: The benefits derived from pure public goods cannot be confined solely to those who have paid for it. Indeed non-payers can enjoy the benefits of consumption at no financial cost – economists call this the 'free-rider' problem. With private goods, consumption ultimately depends on the ability to pay
  2. Non-rival consumption: Consumption by one consumer does not restrict consumption by other consumers – in other words the marginal cost of supplying a public good to an extra person is zero. If it is supplied to one person, it is available to all.
  3. Non-rejectable: The collective supply of a public good for all means that it cannot be rejected by people, a good example is a nuclear defence system or flood defence projects.

There are relatively few examples of pure public goods.

Examples include flood control systems, some of the broadcasting services provided by the BBC, public water supplies, street lighting for roads and motorways, lighthouse protection for ships and also national defence services.


Related Solutions

Explain how the elements of nonappropriability relate to public goods and private goods.
Explain how the elements of nonappropriability relate to public goods and private goods.
Question 1 a. Distinguish the difference between public and private goods and explain how the conditions...
Question 1 a. Distinguish the difference between public and private goods and explain how the conditions of efficient output are determined for public goods. b. “Education is a service that has some characteristics of a public good while at the same time having characteristics of a private good.” Explain Question 2 Explain the meaning of externalities and show how market equilibrium is established under negative externalities. You may use graph to illustrate your answer. Question 3 a. If the government...
1. Explain how Lindahl pricing is used to determine the demand for a public good. a....
1. Explain how Lindahl pricing is used to determine the demand for a public good. a. Provide an example illustrated with a diagram. (Can be hand drawn or computer generated) b. Use your diagram to explain and show how the Samuelson Rule would be used to determine the optimal amount of the public good to provide.
Compare and contrast private goods and public goods? Briefly explain why public goods can cause market...
Compare and contrast private goods and public goods? Briefly explain why public goods can cause market failure
How does the government establish the best price to charge for public goods? (Public goods are...
How does the government establish the best price to charge for public goods? (Public goods are goods that are supplied by the government)
1. Explain that ‘public goods’ are under produced or not produced at all if the decisions...
1. Explain that ‘public goods’ are under produced or not produced at all if the decisions are left to private decisions-makers.
Explain the neutrality of income redistribution in the private provision of pure public goods? How is...
Explain the neutrality of income redistribution in the private provision of pure public goods? How is it related to perfect crowding out of government provision? Consider now the private provision  of a local public good in a star network with three agents. Find the direction of welfare improving   transfer? ​ Find the direction for increasing the aggregate provision? Compare the two results.
In the context of public goods, what is meant by non-rivalry versus rivalry in consumption? What...
In the context of public goods, what is meant by non-rivalry versus rivalry in consumption? What is meant by non-excludability versus excludability in consumption? Give an example of a commodity that is both non-rival and non-excludable? Could a commodity have one of these properties without the other? What is an open access resource? How does it differ from a private good? How does it differ from a public good? Could private provision of a public good occur? Give an example...
1. Discuss how public good are used for the betterment of the general public. Provide at...
1. Discuss how public good are used for the betterment of the general public. Provide at least three examples and provide details on the general government’s expenditure on those goods.
1 ) The correspondence principle provides an understanding of how the services ( or public goods...
1 ) The correspondence principle provides an understanding of how the services ( or public goods ) of government may be organized and delivered . Please describe this principle , and using examples , explain how it can be used in understanding which level of government provides a specific public good
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT