This chapter introduces you to the role of government in our economy, and why it provides certain goods and services but not others. You will also learn how much of these goods and services the government should supply, and which privately provided goods and services it should tax. | Public Goods and Taxation Slide 15 - What is Chapter 15 about? Slide 15 - I. Public Goods Slide 15 - Private Goods Pure private good: (., a cheeseburger) A good or service that is both: Excludable: Non-payers can easily be excluded from using it Rival: Each unit consumed by one person means one less unit available for others Slide 15 - Nonexcludable and Nonrival Goods Nonexcludable: Non-paying users cannot easily be excluded from using the good Example: Fish in the sea Nonrival good: A good whose consumption by one person does not diminish its availability for others Example: radio broadcast, fireworks display Slide 15 - Pure Public Goods Pure public good both nonrival and nonexcludable National defense, TV & radio, Snow-clearing of streets Reasons for government provision Private business providing the good could not collecting payment for costs “Free-rider” problem Efficiency: since marginal cost of serving additional users is zero (nonrival good), it would be | Public Goods and Taxation Slide 15 - What is Chapter 15 about? Slide 15 - I. Public Goods Slide 15 - Private Goods Pure private good: (., a cheeseburger) A good or service that is both: Excludable: Non-payers can easily be excluded from using it Rival: Each unit consumed by one person means one less unit available for others Slide 15 - Nonexcludable and Nonrival Goods Nonexcludable: Non-paying users cannot easily be excluded from using the good Example: Fish in the sea Nonrival good: A good whose consumption by one person does not diminish its availability for others Example: radio broadcast, fireworks display Slide 15 - Pure Public Goods Pure public good both nonrival and nonexcludable National defense, TV & radio, Snow-clearing of streets Reasons for government provision Private business providing the good could not collecting payment for costs “Free-rider” problem Efficiency: since marginal cost of serving additional users is zero (nonrival good), it would be inefficient to charge those users, even if charging were possible. Best to have government provide the good and pay the total costs from tax revenues Slide 15 - Public Goods Technology can change the feasibility of charging for specific services Example: lighthouse or GPS to warn of hazards ? Scrambling & decoding of satellite TV signals ? “Local Public Goods” & scale of consumption Many goods or services are both nonrival & nonexcludable at some scale of provision Example: housing is a private good to families, but all individuals within household get same house characteristics; local parks, local crime rate & neighbourhood quality Slide 15 - Mixed Goods Collective good A good or service that, to at least some degree, is nonrival (public element) but excludable (private element) A large public park in a remote area Pure common good A good for which nonpayers cannot easily be excluded (nonexcludable; public element ) and for which each unit consumed by one person means one .
