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COLORADO / Economics / ECO 2010 / What happens when goods have no prices?

What happens when goods have no prices?

What happens when goods have no prices?

Description

School: University of Colorado at Boulder
Department: Economics
Course: Principles of Microeconmics
Professor: Phil graves
Term: Fall 2016
Tags: Microeconomics
Cost: 25
Name: Econ Notes for 3/15/16
Description: Starting Final Exam Material. These are notes from before spring break and our second midterm.
Uploaded: 04/01/2016
2 Pages 222 Views 0 Unlocks
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Midterm 3 / final materialWe also discuss several other topics like lamassu material

Chapter 11: Public goods and common resourcesWe also discuss several other topics like How to measure an intelligence?

  • When goods have no prices, the market forces that normally allocate resources are absent
  • A good is excludable if a person can be prevented from using it
  • Example: module tickets, food, etc
  • Not excludable: Nation defence, radio signal, etc
  • A good is a rival in consumption of one person’s use or it diminishes others use
  • Rival: smoothie (food, etc)
  • Not rival: music, movies, etc

Private goods: excludable, rival in consumption Example: foodWe also discuss several other topics like 3 major clades of bilaterian animals

Public goods: non - excludable non rival Example: fireworks, national defense

Common resources: rival but not excludable Example: fishing a riverDon't forget about the age old question of What is selective precipitation?

Club goods: excludable but not rival example: cable TVWe also discuss several other topics like What are the 3 ways to view protein structure?

Example: Roads?

        Rival in consumption: only if congested

        Excludable: only if its a toll road

  • Public goods and common resources both have externalities

We also discuss several other topics like Who is the director of chimpanzee facility in Oklahoma that Nim was taken from?

Public goods - difficult for free market to provide because of free - rider

  • Free - rider a person who receives the benefit of a good but avoids paying for it
  • If the benefit of a public good exceeds the cost of providing it, government should provide the good and pay for it with a tax on people who benefit
  • Cost benefit analysis: a study that compares the costs and benefits of providing a public good
  • Example of public goods: public defense

Common Resources

  • Like public goods, common Resources are not excludable
  • Cannot prevent free - riders from using it
  • Little incentive for firms to provide
  • Role for government. Seeking that they are provided
  • Additional problem with common resources: rival in consumption
  • Role for government ensuring they are not overused
  • The tragedy of the commons:  a parable that illustrates why common resources get used more than is socially desirable
  • The private incentives outweigh the public good

Policy Options to Prevent Overconsumption of Common Resources

  • Regulate use of the resource
  • Impose a corrective tax to internalize the externality
  • Auction off permits allowing use of the resources
  • If the resource is land, convert to a private good by dividing and selling parcels to individuals
  • Example: clean air and water
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