Question

Explain the concepts of Rival, NonRival, Exclusive and NonExclusive in regards to Economics. What is the nonexclusive aspect of a public good?

Please use the Matrix. Show the relationships between rival goods, nonrival goods, exclusive goods and nonexclusive goods with private goods, public goods, regulated monopoly, and tragedy of the commons. (8 points)

  Give examples from common social practice or class to illustrate your answer (you must use the concept and definition of the Coase Solution and Transaction Costs to explain this answer). (8 points)

What is the nonexclusive aspect of a public good? (4 Points)

Answer 1

Rival means consumption of good by one person reduces its amount available for the other person.

Non-rival means consumption of the public good by one person does not reduce its amount available for the other person.

Non-exclusion means if public good has been provided then it does not possible to exclude one person from consuming it.

Exclusive means if good is provided then it is possible to exclude one person from consuming it.

Public good is a good which are non-rival and non-exclusive in nature. Non-rival means consumption of the public good by one person does not reduce its amount available for the other person. For example National defense, public park, street light etc. Non-exclusion means if public good has been provided then it does not possible to exclude one person from consuming it. In fact it will be Pareto inefficient to exclude one person because if that person is allowed to consume then he may be better off but other are not worse off. As a result of non-rival and non-exclusion, property there is problem of free rider and due to free rider market fails.

Excludable Private Good Regulated monopoly Public Good Non-excludable Non-rival