Question

2. Suppose that two people live in Traverse City, Michigan - Bert and Ernie. In the winter, the snow is so heavy and frequent that the city is considering adding heating elements under the sidewalk to melt the snow on the sidewalks in order to make them passable. This affects all of the residents. The marginal cost of heating one block of sidewalk is $40. (MC 40.) Use the following demand curves in your answer as needed, suppose that Q is blocks of sidewalk: Bert's: PB-30-Q Ernie's: PE 22 2Q a) What 2 criteria must a public good meet? List and define them. b) Explain how heated sidewalks meet these two criteria. c) Would either Bert or Ernie decide to privately provide the public good? Justify your answer. d) Draw the market demand for the public good. Denote the area where both consumers are willing to pay for additional heated sidewalks "A" and the area where only one of them is willing to pay "B." Label all axes, intercepts, kink points, and slopes.

Answer 1

Answer 2 (a) : Public good signifies the good which is for the public or common people. Public goods are not specific, they are generic in nature and for the mass. One of the primary characteristics of a public good is that it must for everybody. That is, nobody can be excluded from the consumption of a public good. This means, no individual of the country or state can be excluded form its direct consumption. All citizens have equal right upon the consumption of the public good. The Second important characteristic of the public good is that, it is not scarce, and therefore, the consumption of some physical or logical quantity of the public good do not reduce the available quantities for other consumers.

                                          Answer 2 (b) : Heated Sidewalks are public goods and meet both its essential criteria. Heated sidewalks are constructed so that snow can be easily melted during winters. This means that any individual who walks through those lanes is directly benefited. The Government has not imposed any restrictions on the walking of any particular individual through lanes. Anybody can walk through those lanes easily and hassle free due to the heated sideways. Therefore, this good is for public consumption of all and not restricted to few. Secondly, this good, i.e. the walking through the lanes, is generic and if few individuals walk through the lane, this will not reduce the lane for the other individuals. Everybody can enjoy as much walking through the lanes as much as they want, and it will still not reduce the available quantity of the good. Therefore, it meets the second feature of public goods too.

Answer 2 (c) : Bert or Ernie cannot privately provide the public good. When they construct or build a heated lane, they cannot restrict the movements of others on the lane. Anybody walking through the lanes will enjoy the benefits of the heated walkthrough. This means, anybody who wishes to walk through hose lanes can do so, and thereby enjoying or consuming directly some of the benefits of the good. Therefore, Bert or Ernie cannot provide the public good in private manner. A public good is for everybody’s consumption.

Answer 2 (d) :

Public good signifies the good which is for the public or common people. Public goods are not specific, they are generic in nature and for the mass. One of the primary characteristics of a public good is that it must for everybody. That is, nobody can be excluded from the consumption of a public good. This means, no individual of the country or state can be excluded form its direct consumption. All citizens have equal right upon the consumption of the public good. The Second important characteristic of the public good is that, it is not scarce, and therefore, the consumption of some physical or logical quantity of the public good do not reduce the available quantities for other consumers Heated Sidewalks are public goods and meet both its essential criteria. Heated sidewalks are constructed so that snow can be easily melted during winters. This means that any individual who walks through those lanes is directly benefited. The Government has not imposed any restrictions on the walking of any particular individual through lanes. Anybody can walk through those lanes easily and hassle free due to the heated sideways

We can see the market demand cure for the public good above. Here the Quantity of the good is denoted in the X axis, and the price of the good is denoted in the Y-axis. The curves AB and CD denotes the price and Quantity of Bert’s and Ernie’s consumption. The Curve DE denotes the market demand for public good. It can be seen that in a public good, the demand for the good is very high an is not restrictive by any the factor.