INTERMEDIATE
MICROECONOMICS
• TOPIC- Public Goods
II: MARKET GOVT • MADE BY – MANMEET SINGH(2168) AND
AND WELFARE JASKARAN SINGH (2127) ,[Link] 3RD
(MAJOR) YEAR
PUBLIC • Understanding Non-Rivalry and Non-Excludability
GOODS •
• Explanation:
The title introduces the topic, while the image
provides a visual anchor. Public goods are
essential economic concepts that address the
challenges of shared resources.
WHAT ARE PUBLIC GOODS?
• Definition:
Public goods are goods or services that satisfy two critical criteria:
1. Non-Rivalry: One person’s consumption of the good doesn’t reduce its availability for others.
2. Non-Excludability: No individual can be excluded from accessing the good, regardless of whether they
have contributed to its cost.
• Examples:
• National defense: Protects every citizen equally without reducing protection for others.
• Street lighting: Illuminates roads for all, regardless of individual contribution.
• Importance:
• Public goods promote welfare and social equity by providing universal access to essential resources.
• Non-Rivalry:
• Explanation: Consumption by one individual does not
affect others' ability to consume the same good.
• Example: Watching a firework display; one person’s
enjoyment does not reduce another’s.
• Non-Excludability:
CHARACTERISTIC
• Explanation: It is impossible to prevent people from
S OF PUBLIC accessing the good, even if they haven’t paid for it.
GOODS • Example: Breathing clean air; everyone benefits
from it equally, and no one can be excluded.
• Additional Implications:
• Encourage collective use but complicate funding and
provision due to lack of direct profitability.
TYPES OF GOODS (COMPARISON)
•Explanation:
Excludabl Examples •Private Goods: Rival and excludable;
Type Rival?
e?
consumed individually (e.g., a sandwich).
Private Food, •Public Goods: Non-rival and non-
Yes Yes
Goods clothing, cars
excludable; consumed collectively (e.g.,
National clean air).
Public
No No defense,
Goods •Common Resources: Rival but non-
knowledge
excludable, often overused (e.g., fish
Common Fisheries, stocks).
Yes No
Resources forests
•Club Goods: Non-rival but excludable,
Netflix, requiring payment (e.g., subscription
Club Goods No Yes
private parks
services).
• Pure Public Goods:
• National defense: Protects all citizens simultaneously.
• Street lighting: Benefits everyone in a community.
• Scientific knowledge: Available to all, encourages
innovation and learning.
EXAMPLES OF • Impure Public Goods (subject to congestion):
PUBLIC • Public parks: May become crowded, reducing individual
enjoyment.
GOODS • Highways: Free roads are non-excludable but can
experience traffic jams, making them rival under certain
conditions.
• Explanation:
Public goods can be either purely or partially public. The
distinction helps in understanding real-world complexities,
such as congestion in impure public goods.
• Definition:
• The free-rider problem occurs when individuals benefit from a
public good without contributing to its cost.
• Why It Happens:
• Non-Excludability: People cannot be prevented from using
the good.
HE FREE- • Rational Behavior: Individuals may rely on others to bear the
RIDER costs.
PROBLEM • Examples:
• Listening to public radio without donating.
• Using public parks funded by taxes one doesn’t pay.
• Consequences:
• Insufficient funding for public goods.
• Under-provision or complete absence of the good in free
markets.
• Why Markets Fail:
• Free-rider problem discourages voluntary
contributions.
• Public goods are not profitable for private
MARKET producers due to non-excludability.
FAILURE IN • Government’s Role:
PUBLIC • Funding public goods through taxes.
GOODS • Ensuring equitable distribution.
• Regulating use and access.
• Examples:
• Governments fund national defense, public
healthcare, and education.
• Methods of Funding:
1. Taxes:
1. Governments collect taxes to fund public goods like
national defense and public infrastructure.
2. Subsidies:
1. Encourage private or nonprofit provision (e.g., research
FUNDING grants).
PUBLIC 3. Public-Private Partnerships (PPPs):
1. Collaboration between governments and private entities
GOODS (e.g., toll roads).
4. Voluntary Contributions:
• Donations (e.g., Wikipedia, NPR). Challenges:
• Ensuring fairness in taxation.
• Avoiding inefficiencies and corruption.
• Why It’s a Public Good:
• Non-Rival: Protects all citizens equally
without diminishing protection for others.
• Non-Excludable: Every citizen benefits,
whether or not they contribute directly.
CASE STUDY:
• How It’s Provided:
NATIONAL
• Funded entirely through taxes.
DEFENSE
• Managed by the government to ensure
national security.
• Key Insights:
• Highlights the importance of collective funding
for universal benefits.
• Public Goods:
• Non-Rival and Non-Excludable (e.g.,
knowledge).
• Common Resources:
PUBLIC • Rival but Non-Excludable (e.g., fish stocks).
GOODS VS. • Tragedy of the Commons:
COMMON • Overuse and depletion of common resources
RESOURCES due to lack of ownership.
• Solutions:
• Regulation (e.g., fishing quotas).
• Privatization (e.g., assigned fishing rights).
GLOBAL CHALLENGES AND PUBLIC GOODS
• Global Public Goods:
• Climate change mitigation.
• Disease control (e.g., vaccines).
• International peacekeeping.
• Challenges:
• Funding and cooperation across nations.
• Aligning national interests with global needs.
• Key Takeaways:
• Public goods are essential for societal welfare.
• Free markets fail to provide them efficiently.
• Governments play a critical role in funding and
managing public goods.
• Final Thought:
CONCLUSION • Effective provision of public goods requires
collective responsibility, fair contribution, and
innovative funding strategies.
• Explanation:
The conclusion ties together all aspects of public
goods, leaving the audience with a clear
understanding of their importance and challenges.
