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Public goods Macro 2014


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Public goods Macro 2014

  1. 1. Group Assignment Due midnight on Friday 1/24 by email Create a youtube vide on the following question: 1. Why do you think the government is the only builder of roads, armies or street lights? And do you think it does a good job at providing these items? Everyone gets the same grade
  2. 2. Problems with assignment? • Strategy? • Incentives?
  3. 3. Brainstorm at your tables • 3 + goods that if you consume it, your friends can’t consume it at the same time • 1.5 + goods that if you consume it, your friends are unaffected by your consumption
  4. 4. Private Goods • Rivaled consumption • A person’s consumption affects others’ consumption • Excludable • Firms can exclude people who don’t pay
  5. 5. Public Goods • Goods that are both non-excludable and non-rivaled in consumption
  6. 6. Free Rider Problem • Free Rider – a person who does not pay for, but benefits from a public good How does society pay for public goods? Taxes User fees
  7. 7. Private Goods For example: food Club goods EX: Golf Course, movie theatre Common Goods EX: Open ocean fishing Public goods EX: National Defense Street lights
  8. 8. Excludable? Rivaled Consp.?
  9. 9. Excludable? Rivaled Consp.?
  10. 10. Excludable? Rivaled Consp.?
  11. 11. Excludable? Rivaled Consp.?
  12. 12. Excludable? Rivaled Consp.?
  13. 13. AP question 1. A pure public good is a good that is a) Provided efficiently by markets b) Rivalrous and excludable in consumption c) Nonrivalrous and excludable in consumption d) Nonrivalrous and nonexcludeable in consumption e) Rivalrous and nonexcludable in consumption
  14. 14. AP question 1. Which of the following would fit the definition of a public good? a) Broadcast FM Radio b) Movie Theater tickets c) Submarine sandwiches d) Medical insurance e) Cable television