Transcript Public Goods and Services

Public Goods and Services
Objectives
 Students will differentiate public goods from private
goods
 Students will explain externalities
 Students will discuss the reason public goods and
services are necessary
 Students will identify examples of public goods and
services provided by the government
Private Goods
 Characteristics
 People who are not willing to pay for the product can be kept
from consuming it
 One person’s consumption of a product reduces the amount
available for other people
 Examples
Buying an item at the grocery store means someone else cannot buy
that item
 Going to the doctor means that someone else cannot have that same
slot of time
 Buying movie tickets means that someone else is prohibited from
having that same seat for the show
 ETC.

Public Goods
 Characteristics
 Virtually impossible to
confine usage to those that
have paid
 Consumption by one
person does not reduce
the availability of the good
to others
 Examples
A lighthouse can be seen by
everyone at sea within a
certain distance
 Highway system
 Washington Monument

Externalities
 Externality
 An indirect effect of an action; also called a spillover
effect.
 Causes a cost or provides a benefit for a party who did not
agree to the action
Externalities
 Negative externality

Third parties bear a cost
for a problem they did not
cause
A factory that produces air
pollution
 Factories dumping toxins
into waterways

 Positive Externality

Third parties reap the
benefits of something for
which they did not pay

Dam – will help regulate
the flow of water which
benefits the people
downstream, prevents
floods, etc
Public Goods and Externalities
 Public Goods are not supplied by private sector
producers (private businesses and corporation that
are seeking to make a profit) because they will
likely not make an economic profit

Public goods cause positive externalities

Free-riders are associated with positive externalities
 Consumers can take a “free ride” without having to pay for the
good or service
 Example – people get benefits of street lights without having to
pay for them
Solving the Free-Rider Problem
 Public goods and services are provided by the
government
Financed through taxation of individual households and
businesses
 Examples

National defense
 Measures to prevent health epidemics
 Inoculations or shots given for low cost
 Enforcing clean air regulations
 Road signage

Government Provided Public Goods
 Street lights
 Lighthouses
 Highway systems
 Road signs
 Military
 Dams
 Healthcare
Questions?
Hazardous gas released from a factory’s smokestack is an
example of __________ externality.
A.
B.
C.
D.
local
positive
resource
negative
Questions?
Hazardous gas released from a factory’s smokestack is an
example of __________ externality.
A.
B.
C.
D.
local
positive
resource
negative
Questions?
The Statue of Liberty can be seen for miles around because of
its immense size. Since it is impossible to charge people to see
the monument it is example of a __________.
A.
B.
C.
D.
public good
private good
federal commodity
government resource
Questions?
The Statue of Liberty can be seen for miles around because of
its immense size. Since it is impossible to charge people to see
the monument it is example of a __________.
A.
B.
C.
D.
public good
private good
federal commodity
government resource
Questions?
Public goods are not produced by private sector producers
because __________.
A.
B.
C.
D.
there is too much competition
they are unable to produce them
monopolies are likely to be formed
they will not make an economic profit
Questions?
Public goods are not produced by private sector producers
because __________.
A.
B.
C.
D.
there is too much competition
they are unable to produce them
monopolies are likely to be formed
they will not make an economic profit
Questions?
Public goods can cause positive _______________.
A.
B.
C.
D.
externalities
productivity
economic growth
consumer reaction
Questions?
Public goods can cause positive _______________.
A.
B.
C.
D.
externalities
productivity
economic growth
consumer reaction
Questions?
An indirect effect of an action, be it a cost or benefit, for a
third party who did not agree to the action is known as a(n)
__________.
A.
B.
C.
D.
productivity
substance
externality
incentive
Questions?
An indirect effect of an action, be it a cost or benefit, for a
third party who did not agree to the action is known as a(n)
__________.
A.
B.
C.
D.
productivity
substance
externality
incentive