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Ch 3 Econ Lesson 3 Public Goods and Externalities

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Bryan Poepperling

on 27 March 2013

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Transcript of Ch 3 Econ Lesson 3 Public Goods and Externalities

Open-Access Goods Private Goods Positive and Negative
Externalities Quasi-Public and Open-Access Goods Public Goods Quasi- Public Goods - The economy consists of some goods that are non-rival but exclusive
- For example; many households can watch a TV show without harming the reception of other viewers
- However, the producers of the show make viewers pay through commercials or charging each household, such as with cable TV:
- The TV signal is non-rival but exclusive Chapter 3 - rival but non-exclusive -

- The fish in the ocean are rival because every fish caught is not available for others to catch
- However, fish are non-exclusive because it would be impossible for a private firm to prevent everyone access to all of the fish in the ocean
- In the absence of regulations, open-access goods are overused
-Governments try to enforce restrictions to keep the resources from being depleted Lesson 3: Public Goods and Externalities
Mr. Poepperling 1. What is the name of goods that are rival but are non-exclusive?

2. Give an example of one positive and one negative externality

3. What is the name of goods that are rival in consumption and are exclusive? Ticket out of the Door Quiz - One person's benefit does not reduce the amount available to others; available to all in equal amounts
- Public Goods cannot be provided through the market system because of the problem of who would pay for them; therefore producers can't sell these goods and make a profit
- non-rival and non-exclusive -

- Problem: Free-riders
- People overuse or misuse products since the product doesn't belong to anyone
- The government can solve this by taxing the good, that way everyone essentially pays for it Public Goods - By-products of production and consumption
- Can be positive or negative

- The private sector produces too many negative externalities and too few positive externalities

- Government thus intervenes in the market to improve the negative and promote positive externalities
*Watch Video on Bejing Pollution* Externalities U.S. Private
and Public Sectors - Have two important features:
1. - They are rival in consumption, or the amount consumed by one person is unavailable for others to consume Ex.- Pizza
2. - Suppliers can easily exclude those who don't pay, the private good is exclusive

- Think of five examples of private goods, or those that are rival in consumption and are exclusive. Private Goods Standards and Objectives
- 6.2.12.F: Evaluate the impact of private economic institutions on the individual, the national and the international economy
- 6.4.12.C: Evaluate the impact of multinational corporations and other non-governmental organizations

What we will learn:
- At least two examples of a private, public, quasi-public, and open-access good
- At least one example of a negative externality that is a result of production or consumption
- At least one example of a positive externality that is a result of production or consumption
*Watch YouTube Clip* Negative Externalities - The by-products of production or consumption that impose costs on third parties
- Polluters of the atmosphere, waterways, and other open-access resources tend to ignore the impact of their pollution
- The government must step in to create restrictions and improve the allocation of open-access resources.
Ex. Government restrictions on what can be dumped into rivers, or laws that limit the amount of gasses released into the atmosphere Positive Externalities - The by-products of consumption or production that benefit third parties
- Examples include getting inoculations against diseases and good old Education!
- The government aims to increase the level of production beyond what would be chosen privately if production resulted in positive externalities
- Example: the government providing free primary and secondary education to all of you copying this slide in your notes *Group Activity* - The class will be split into two teams

- Each team must list as many types of public and private goods as possible in five minutes, and be able to give an explanation for their reasoning behind each choice

- The winning team will turn their names in to Mr. Poepperling for a bonus point on the next test!
Full transcript