PUBLIC GOODS AND COMMON RESOURCES. Chapter 11. “The best things in life are free. . .”. Most goods in our economy are allocated in markets. ä For these goods, prices are the signals that guide the decisions of buyers and sellers. “The best things in life are free. . .”.
PUBLIC GOODS AND COMMON RESOURCES
ä For these goods, prices are the signals that guide the decisions of buyers and sellers.
ä People can be prevented from enjoying the good.
ä Laws recognize and enforce private property rights.
ä One person’s use of the good reduces the benefits available to others.
ä Are both excludable and rival.
ä Are neither excludable nor rival.
ä Are rival but not excludable.
ä Are excludable but not rival.
ä Externalities arise because something of value has no price attached to it.
ä People receive benefits without having to compensate anyone for the use of scarce resources.
ä It is difficult to do because of the absence of prices needed to estimate social benefits and resource costs.
äThe value of life, the consumer’s time, and aesthetics are difficult to assess.
ä Thus, common resources tend to be used excessively.
ä This creates a negativeexternality.
. . . by defining property rights and letting market forces work toward economic efficiency.
. . . by regulating the private behavior that is causing overuse.
. . . by supplying the good.