This document provides an overview of different types of goods: private goods, public goods, common resources, and club goods. It defines key characteristics of excludability and rivalry in consumption. Private goods are excludable and rival, while public goods are non-excludable and non-rival. Common resources are non-excludable but rival. The document discusses how free riders can consume public goods without paying and the tragedy of the commons, where common resources are depleted if not regulated. Government policy options are discussed to address issues with non-private goods.

1. Microeconomics
Lecture 11
!
Public Goods
and
Common Resources

2. Key Terms
excludability
rivalry in consumption
private goods
public goods
common resources
club goods
free rider
cost-benefit analysis
Tragedy of the Commons

3. Four Types of Goods
Private Goods
Public Goods
Common Resources
Club Goods

4. Some goods do not have
prices
How much should we
produce?
!
Government policy

5. Private Goods
Goods that are excludable
and rival in consumption.
!
Can exclude others
If I consume, you cannot

6. Excludable
Can people be prevented
from using the good?
!
Yes
No

7. Rivalry in Consumption
Can one person’s use of a
good reduce others use?
!
Can two people consume at
the same time without
reducing?

8. Exclude others
!
When I
consume it
diminishes

9. Public Goods
Goods that are neither excludable
nor rival in consumption.
!
Cannot exclude
Everyone can consume without
reducing amount

11. Free Rider
a person who
receives a benefit
but does not pay for
it

12. National Defense

13. Basic Research
!
Everybody Benefits

14. Common Resources
Goods that rival in
consumption but are not
excludable
!
Cannot exclude others
If I consume, you cannot

15. Common
Resource
!
Drink as fast
as possible
before it
runs out

16. Private Good
Each person has his own cup

17. Which method will
incentivize people
to not waste the resource?
Share one cup
Each person gets
their own cup

24. Tragedy of the Commons
If everyone owns it,
no one owns it
Privatize the commons

29. Property Rights
Reduce contention
!
Create wealth