Paper 3 · public goods and merit goods
Which characteristic distinguishes a public good, such as street lighting or national defence, from a private good?
AIt is non-excludable and non-rival, so one person's use of it does not reduce its availability to anyone else.
BIt is non-rival but excludable, so a price can be charged to keep non-payers from using it, as with a cinema seat.
CIt is non-excludable but rival, so overuse by some users can deplete what remains for everyone else, as with an open fishery.
DIt is rival and excludable, so it is bought and sold in a market like any ordinary private good.
Explanation: A pure public good has both properties together: non-rivalry means one person's consumption does not reduce what is available to others, and non-excludability means no one can be stopped from consuming it once it is provided, which is exactly why private firms have no incentive to supply it and why the free-rider problem arises.
Derived from ZIMSEC Economics Paper 3, November 2004, Q2
