1 / 8

AP Economics

AP Economics. Mr. Bernstein Module 76: Public Goods January 14, 2014. AP Economics Mr. Bernstein. Public vs Private Goods Private Goods Excludable - Suppliers can prevent those who don’t pay from consuming Rival – Cannot be consumed by more than one person at the same time

nibal
Download Presentation

AP Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AP Economics Mr. Bernstein Module 76: Public Goods January 14, 2014

  2. AP EconomicsMr. Bernstein Public vs Private Goods • Private Goods • Excludable - Suppliers can prevent those who don’t pay from consuming • Rival – Cannot be consumed by more than one person at the same time • Public Goods • Non-excludable and non-rival • Example of Public Good: Fire Department (non-rival, benefits neighbors as well as burning house)

  3. AP EconomicsMr. Bernstein Common and Artificially Scarce Resources • Common Resources • Non-excludable but rival • ie fish in the ocean…anyone can catch them but only one person at a time can consume • Artificially Scare Resources • Excludable but non-rival • Pay-per-view movies

  4. AP EconomicsMr. Bernstein Public, Private, Common and Artificially Scarce

  5. AP EconomicsMr. Bernstein Markets Only Provide Private Goods Efficiently • Freeloader problem • Efficient level of Public Good is where MSC = MSB • Variation of MC = MR • MSB is sum of individual MSB curves

  6. AP EconomicsMr. Bernstein Common Resources • Example: Well water • Nonexcludable, rival • “Tragedy of Commons” (1968) • User imposes very small cost to society so individual will overuse • Solutions include tax or regulate users, system of tradable licenses, or otherwise making resource excludable and assigning rights (ie logging Public Lands)

  7. AP EconomicsMr. Bernstein Common Resources • S is sum of individual supply curves • Does not include cost imposed on others • As a result, MSC lies above S • Equilibrium is higher than optimal (MSC=D) point

  8. AP EconomicsMr. Bernstein Efficient Level of Artificially Scarce Goods • Example: Pay Per View (On Demand) • Excludable, nonrival • MC ~ = zero • So the efficient quantity is where Demand curve intersects MC = 0 line… • But there is no profit there, so firm excludes some customers by charging $5 to view and quantity ordered is less than efficient quantity

More Related