Compare_and_Contrast_Goods

A public good is a good, a product, or a service that one person can use without reducing its availability to another person and where everyone can use it and no one is excluded. In economics, a public good is referred to as both non-rivaled and non-excludable. Non-rivaled means that the product or service is readily available with unlimited amounts therefore there is no reason to deny anyone the use of the product or service. Non-excludable means it is impossible to prevent people from having access to the product or service who has not paid for it. “One problem with public goods is the free-rider problem. This problem says that a rational person will not contribute to the provision of a public good because he does not need to contribute in order to benefit” (Public Good, 2011). The opposite of a public good is a private good. This good must be purchased in order to be used, and when used by one person, prevents another person from ever using it. Private goods are considered rivalrous and excludable in economics. Meaning that there is competition to attain the product or service and that it is no longer available to others once it is used. “Private goods are less likely to experience the free rider problem because a private good has to be purchased - it is not readily available for free” (Private Good, 2011). A company’s goal in producing a private good is to make a profit. Without the incentive created by revenue, a company is unlikely to want to produce the good. Common resources are both rival and non-excludable. In other words, they are free of charge to anyone who wishes to use them but the use by one person reduces another person’s use of it. When people are not charged for them, these resources are used excessively which in turn creates a negative externality. “The Tragedy of the Commons is a story with a general lesson: When one person uses a common resource, he or she diminishes another person’s enjoyment of it” (Public Goods and Common Resources, 2001). A very good example would be the environment, precisely clean air and water. A natural monopoly can be viewed as the opposite of a common resource; they are excludable but not rival. A natural monopoly is where the cost of a product or service is too high for another company or firm to compete and make a profit. The reason for this is that it would be less efficient for more than one company to supply the product or service. Examples of these are utilities such as water and natural gas. “It would be very costly to build a second set of water and sewerage pipes in a city” (Foldvary, 1999). Since it is only sensible to have some natural monopolies, it is important for governments to regulate them to ensure that consumers get a fair deal. References Foldvary, F. E. (1999). Natural Monopolies. Retrieved April 8, 2011, from The Progress Report: http://www.progress.org/fold74.htm Private Good. (2011). Retrieved April 8, 2011, from Investopedia: http://www.investopedia. com/terms/p/private-good.asp Public Good. (2011). Retrieved April 8, 2011, from Investopedia: http://www.investopedia. com/terms/p/public-good.asp Public Goods and Common Resources. (2001). Retrieved April 8, 2011, from Windward Hawaii Education: http://www.windward.hawaii.edu/facstaff/briggs-p/Microeconomics/ Chap_11.pdf