Practise distinguishing free goods from scarce private economic goods using resource cost, rivalry and excludability rather than whether the user pays at the point of use.
With the help of examples, explain the nature and characteristics of free goods and private goods (economic goods) and consider the significance of the distinction between these two types of good.
Follow the point-based marking guidance at the top of this mark scheme and award: up to 3 marks for AO1 Knowledge and understanding up to 3 marks for AO2 Analysis and up to 2 marks for AO3 Evaluation.
AO1 Knowledge and understanding (max 3 marks)
Free goods:
- A free good is one which is consumed by people without a situation of scarcity arising, i.e. there is enough of the good to satisfy everybody and it has no opportunity cost, such as sunlight. (1)
Private goods (economic goods):
- A private or economic good is one which is consumed by an individual for their own private benefit, such as clothing. (1)
Use of appropriate examples of each type of good to support the explanations. (1)
AO2 Analysis (max 3 marks)
Free goods:
- As a free good is not scarce, it does not require a market. The supply of the good equals the demand for it at zero price. It takes no factors of production to produce a free good and so there is no opportunity cost involved; analysis of the significance of there being no opportunity cost.
Private (economic) goods:
- Excludability: people can be excluded from consuming it if they do not pay the required price for it.
- Rivalry: the consumption of a private good by one person reduces its availability for other people, i.e. there is rivalry in such a situation because consumers are in competition with other consumers to consume a particular product.
AO3 Evaluation (max 2 marks)
Offers a valid judgement on the significance of the distinction between the two types of good (1) to reach a conclusion. (1)
AO1 Knowledge and understanding
AO2 Analysis
AO3 Evaluation