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Showing posts with label public good. Show all posts
Showing posts with label public good. Show all posts

## Examples of public goods, a list of public goods

08:31
This post was updated in August of 2018 with new information and examples.

Remember the definition of a public good is something that is non-rival, and non-excludable.

Non-rival means that if one person consumes a good, that good can still be consumed by someone else.  For example, a radio station, just because I am listening to a radio station doesn't mean that someone else can't.  An example of a rival good is an apple.  If I eat the apple, you certainly cannot eat it after I am done.

## Finding demand curves for public goods, and social demand curves

20:15
This post goes over a public goods question, where the individual demand curves need to summed up in order to get a legitimate social demand curve.  The reason we need a social demand curve is because everyone benefits from the good in question, so if each consumer only buys until they are satisfied, then they are ignoring the potential benefits to others in the market.

Four towns share a common water source. By buying open land along the watershed (area from which the water flows) the towns can preserve its purity from sewage, road runoff, and such. The land demand schedule for each town based on water treatment costs saved can be expressed as

P = \$34,000-10Qd

where Qd is acres purchased and P is the price the town would be willing to pay.

a. If the cost of land is \$30,000 per acre, how much land will be purchased if each town operates independently? How much if they form a joint commission for land purchases? Graph the different possibilities. (If the economic theory is not clear, imagine representatives of the four towns sitting around a table, discussing the costs and benefits of purchasing different amounts of land.)