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ECON
Chapter 18
13
Business
05/06/2010

Additional Business Flashcards

 


 

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Term
Private Goods
Definition
a good that is both excludable and rival in consumption.
Term
Private Goods=Excludable
Definition

  supplies of the good can prevent people who don’t pay from consuming it. A good is excludable: if the supplier of that good can prevent people who do not pay from consuming it.

Term
Private Goods=Rival in Consumption
Definition

  They are rival in consumption: the same unit of the good cannot be consumed by more than one person at the same time.

Term
Nonexcludable
Definition
when a good is nonexcludable, the supplier cannot prevent consumption by people who do not pay for it.
Term
Nonrival in Consumption
Definition
a good is nonrival in consumption if more than one person can consume the same unit of the good at the same time.
Term
Types of Goods
Definition

Private goods, artificially scarce goods, common resources & public goods. (Figure 18-1)

Term
Free-rider Problem
Definition
Goods that are nonexcludable suffer from the free-rider problems: individuals have no incentive to pay for their own consumption and instead will take a “free ride” on anyone who does pay.
Term
Public Goods
Definition

   both nonexcludable and nonrival in consumption

Providing Public Goods- how much should be provided? (Figure 18-2)

Term
Cost-Benefit Analysis
Definition
Governments engage in cost-benefit analysis when they estimate the social costs and social benefits of providing a public good
Term
Common Resources
Definition

  is a nonexcludable and rival in consumption: you can’t stop me from consuming the good, and more consumption by me means less of the good available for you.

Term
Overuse
Definition

    common resources left to the market suffer from overuse: individuals ignore the fact that their use depletes the amount of the resource remaining for other. (Figure 18-3)

Term

The Efficient Use and Maintenance of a Common Resource

Definition

·         Tax or otherwise regulate the use of the common resource

·         Create a system of tradable licenses for the right to use the common resource

·         Make the common resource excludable and assign property right to some individuals

Term
Definition