Part 2 book “Principles of microeconomics” has contents: Income inequality and poverty, the theory of consumer choice, earnings and discrimination, the markets for the factors of production, monopolistic competition, firms in competitive markets, and other contents. | IN THIS CHAPTER YOU WILL . . . Learn the defining characteristics of public goods and common resources Examine why private markets fail to provide public goods Consider some of the impor tant public goods in our economy PUBLIC COMMON GOODS AND RESOURCES An old song lyric maintains that “the best things in life are free.” A moment’s thought reveals a long list of goods that the songwriter could have had in mind. Nature provides some of them, such as rivers, mountains, beaches, lakes, and oceans. The government provides others, such as playgrounds, parks, and parades. In each case, people do not pay a fee when they choose to enjoy the benefit of the good. Free goods provide a special challenge for economic analysis. Most goods in our economy are allocated in markets, where buyers pay for what they receive and sellers are paid for what they provide. For these goods, prices are the signals that guide the decisions of buyers and sellers. When goods are available free of charge, however, the market forces that normally allocate resources in our economy are absent. In this chapter we examine the problems that arise for goods without market prices. Our analysis will shed light on one of the Ten Principles of Economics 225 See why the costbenefit analysis of public goods is both necessary and dif ficult Examine why people tend to use common resources too much Consider some of the impor tant common resources in our economy 226 PA R T F O U R THE ECONOMICS OF THE PUBLIC SECTOR in Chapter 1: Governments can sometimes improve market outcomes. When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in the proper amounts. In such cases, government policy can potentially remedy the market failure and raise economic well-being. THE DIFFERENT KINDS OF GOODS How well do markets work in providing the goods that people want? The answer to this question depends on the good being considered. As we discussed .
