Question

Explain the concepts of Rival, NonRival, Exclusive and NonExclusive in regards to Economics. What is the nonexclusive aspect of a public good?

1. Please use the Matrix. Show the relationships between rival goods, nonrival goods, exclusive goods and nonexclusive goods with private goods, public goods, regulated monopoly, and tragedy of the commons.
2.   Give examples from common social practice or class to illustrate your answer (you must use the concept and definition of the Coase Solution and Transaction Costs to explain this answer).
3. What is the nonexclusive aspect of a public good?

Answer 1

Rival: When consumption of good by one person makes it available less for the another person.

Non rival: When consumption of good by one person does not affect its availability to other people

Excludable: When it is possible to exclude one person from consuming the good

Non excludable: When it is not possible to exclude anybody from consumption of a good

A)

The required matrix with examples is drawn below:

B)

There is a park near my locality. It is a public good because it is both non rival and non exclusive in nature. Now, since there are no well defined property rights on these parks, people start littering and throwing their garbage in it, leading it to become a waste land. Now, government allots property rights of this park to a resident welfare association. These people wish to talk to garbage throwers to not do it but there are no transaction costs involved to talk to them and make them understand. In order to solve this problem, a coase theorem needs to be applied i.e. bargaining among the garbage throwers and RWA that would solve this problem.

C)

The non exclusive aspect of public good is that it is not possible to exclude anybody from consuming the public good because of lack of property rights. For e.g. air