The free-rider problem occurs when individuals receive benefits from a public good without contributing to its provision. This leads to an underprovision of public goods, as individuals have no incentive to pay for something they can access without paying. Public provision of goods can overcome this by requiring contributions through taxes that are used to fund public goods from which all benefit.

1. FREE-RIDER
PROBLEM
-Explain the free-rider
problem
-How public provision can
help to overcome that
problem

2. DEFINITION
 Public good is both nonrival and
nonexcludable. A public good benefits
everyone, and no one can be excluded
from its benefits

3. When fireworks are
displayed in a
public location, it's
considered as a
public good since
everyone can see
it for free

4. DEFINITION
 A free rider is a person who enjoys the
benefits of a good or service without
paying for it.

5. DEFINITION
 Marginal social benefit is the sum of the
marginal benefits of all the individuals at
each quantity.
 Marginal social cost is the sum of the
marginal costs of all individuals at each
quantity

6. FREE RIDER PROBLEM
 A free rider problem is a situation in which
individuals or businesses are receiving
benefits without actually contributing
anything, thus creating an unfair balance
in the distribution of revenues or other
resources
- Non -production
- Under – production
- Excessive

7. FREE RIDER PROBLEM
 The free rider problem is that the
economy would provide an inefficiently
small quantity of a public good
Marginal social benefit from the public
good would exceed its marginal social
cost
 Resources can be used more efficiently
by increasing a number of goods

8. FREE RIDER PROBLEM

9. SOLUTIONS
 Tax
 Appealing To People’s Altruism.
 Make A Public Good private
 Legislation

10. TAX
 Treat the many
beneficiaries as one
consumer and then
divide the cost
equally.

11. 2. Appealing
To People’s
Altruism
 For services which
have relatively low
cost, asking for
donations to raise
funds

12. 3. Make A Public
Goods private
 A beautiful garden could
be seen as a public
good. However, if you
erect a high barrier and
limit entrance to those
willing to pay, it loses its
feature as a public good
and becomes a private
good.

13. 4 .Legislation
 The government
have tried various
options such as:
 Quotes
 Legislation
 Compensation

14. THANK YOU
FOR
LISTENING!