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育人犹如春风化雨，授业不惜蜡炬成灰
精品教学教案设计 | Excellent teaching plan
r 11
11 PUBLIC GOODS AND COMMON
RESOURCES
WHAT’S NEW IN THE SEVENTH EDITION:
There are no major changes to this chapter.
LEARNING OBJECTIVES:
By the end of this chapter, students should understand:
??the defining characteristics of public goods and common resources.
??why private markets fail to provide public goods.
??some of the important public goods in our economy.
??why the cost–benefit analysis of public goods is both necessary and difficult.
??why people tend to use common resources too much.
??some of the important common resources in our economy.
CONTEXT AND PURPOSE:
Chapter 11 is the second chapter in a three-chapter sequence on the economics of the public sector. Chapter 10 addressed externalities. Chapter 11 addresses public goods and common resources—goods for which it is difficult to charge prices to users. Chapter 12 will address the tax system.
育人犹如春风化雨，授业不惜蜡炬成灰
精品教学教案设计 | Excellent teaching plan
The purpose of Chapter 11 is to address a group of goods that are free to the consumer. When goods are free, market forces that normally allocate resources are absent. Therefore, free goods, such as playgrounds and public parks, may not be produced and consumed in the proper amounts. Government can potentially remedy this market failure and improve economic well-being.
KEY POINTS:
??Goods differ in whether they are excludable and whether they are rival in consumption.
A good is excludable if it is possible to prevent someone from using it. A good is rival in consumption if one person’s use of the good reduces other’s ability to use the same unit of the good. Markets work best for private goods, which are both excludable and rival in consumption. Markets do not work as well for other types of goods.
??Public goods are neither rival in consumption nor excludable. Examples of public goods
include fireworks displays, national defense, and the creation of fundamental
knowledge. Because people are not charged for their use of the public good, they have an incentive to free ride, making private provision of the good untenable. Therefore, governments provide public goods, basing their decision about the quantity of each good on cost–benefit analysis.
??Common resources are rival in consumption but not excludable. Examples include
common grazing land, clean air, and congested roads. Because people are not charged for their use of common resources, they tend to use them excessively. Therefore, governments use various methods to limit the use of common resources.
CHAPTER OUTLINE:
I. The Different Kinds of Goods
A. When classifying types of goods in the economy, two characteristics should be
examined.
1. Definition of excludability: the property of a good whereby a person can be prevented from using it. 2. Definition of rivalry in consumption: the property of a good whereby one person’s use diminishes other people’s use. B. Using these two characteristics, goods can be divided into four categories.
育人犹如春风化雨，授业不惜蜡炬成灰
精品教学教案设计 | Excellent teaching plan
1. Definition of private goods: goods that are both excludable and rival in consumption. 2. Definition of public goods: goods that are neither excludable nor rival in consumption. 3. Definition of common resources: goods that are rival in consumption but not excludable. 4. Definition of club goods: goods that are excludable but not rival in
consumption.
Yes Excludable? Yes Private Goods ??ice-cream cones ??clothing ??congested toll roads Common Resources ??fish in the ocean ??the environment ??congested nontoll roads Rival in consumption? No Club Goods ??fire protection ??cable TV ??uncongested toll roads Public Goods ??national defense ??knowledge ??uncongested nontoll roads Figure 1 No
C. The boundary between the categories is sometimes fuzzy. Whether goods are
excludable or rival in consumption is often a matter of degree.
D. Public goods and common resources each create externalities because they have
value yet have no price because they are not sold in the marketplace. These external effects imply that market outcomes will be inefficient in the absence of government involvement or private resolutions to correct the externality.
育人犹如春风化雨，授业不惜蜡炬成灰
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