Practise classifying free, private, public, merit and demerit goods through scarcity, rivalry, excludability and information failure, then connecting each type to allocation…
A public good must both be non-rivalrous in consumption and have the characteristic of non-excludability.
Which situation meets both of these conditions?
a former nationalised rail network which has been privatised
a good that has an opportunity cost
the building of a new toll road which charges all users the same toll
the provision of street lighting which improves a locality
Which merit good is likely to be under-consumed the most?
level of imperfect
information among
consumers
subsidy received
by producers
high
yes
high
no
low
yes
low
no
Some goods are over-consumed in a market economy.
What is likely to be the cause of this?
Consumer surplus exceeds producer surplus.
Consumers undervalue the benefits of consuming the goods.
There is excess supply in the market for the goods.
There is imperfect information in the market.
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.
