Here we should know about the two characteristic of various goods :
1. Excludable : The property of a good whereby a person can be prevented from using it .
You can make the item Excludable easly , just put price in the item so you have done to make that item excludable. For example there are free ice cream , because it free all the people can take it . Now the seller tag a price as 4000 rupiah, so all the people that have money below 4000 can't buy it .
2. Rival in consumption : The property of a good whereby one person's use diminishes other people's use. For the example fresh water. You have 10litter of clean water then you use it as 6 litter . Now your friend can't use the clean water as 10litter , your friend only can enjoy 4 litter of clean water.
From that characteristic goods divided into 4 categories .
1. private goods are both excludable and rival in consumption . For the example , the ice creams, clean water, cake, and the others .
2. public goods are neither excludable and rival in consumption . The tornado siren , the fireworks, the parade , or the others.
3. Common resources are rival in consumption but not excludable for the example fish in the sea, all the fisherman can catch the fish without any price . Water (not the clean one) all the people can take it from the sea, lake or river for free and don't need to pay .
4. Club Goods are excludable but not rival in consumption example the fire protection , and the others !
Now we will talk about the goods that have free of charge !
Public Goods
Here First we will talk about the problem , second we talk about the some important public goods . and third we talk about the difficult job of cost-benefit analysis.
The free rider problems
The free rider is a person who receives the benefit of a good but does not pay for it. Because people would have an incentive to be free riders than ticket buyers , the market would fail to provide the efficient outcome .
The some important public goods
1. National Defence
2. Basic Research
3. Fighting Poverty
The difficult job of cost-benefit analysis
Cost benefit analysis : refers to a study that compares the cost and the benefits to society of providing the public goods . in order to decide whether to provide public good or not , the total benefits of all those who use the good must be compared to the costs of providing and maintaining the public goods .
A cost-benefit analysis would be used to estimate the total costs and benefits of the project to estimate the total costs and benefits of the porject to society as a whole .
It is difficult to do because of the absence of prices needed to estimate social benefits and resources costs & the value of life the consumer's time and aesthetics are difficult to assess .
Common Resources
Here we will talk the same like the public goods, first we will talk about Tragedy of commons & some important common resources .
The tragedy of the commons
The Tragedy of the Commons is a parable that illustrates why common resources get used
more than is desirable from the standpoint of society as a whole.
1. Common resources tend to be used excessively when individuals are not charged for their usage.
2. This is similar to a negative externality.
Thats all !!
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