Introduction to Basics of Economics
Public goods are non-excludable and non-rivalrous. Non-excludable means that it is impossible to prevent anyone from using the good, even if they do not pay for it. Non-rivalrous means that the use of the good by one person does not reduce its availability to others. Examples of public goods include clean air, national defense, and streetlights.
Common resources are rivalrous and non-excludable. Rivalrous means that the use of the good by one person reduces its availability to others. Non-excludable means that it is impossible to prevent anyone from using the good, even if they do not pay for it. Examples of common resources include fish in the ocean, timber in the forest, and fresh water.
Because public goods and common resources are not allocated efficiently by the market, governments may intervene to provide or regulate them. This can be done through taxes or subsidies to incentivize the production of public goods or regulate the use of common resources to avoid their depletion. However, government intervention can also result in inefficiencies and unintended consequences.
One example of government intervention in the provision of public goods is national defense. The government provides national defense as a public good because it is non-excludable and non-rivalrous. Everyone benefits from national defense, even if they do not pay for it. Because of this, defense cannot be provided efficiently by the market because individuals do not have an incentive to pay for it.
An example of government intervention in the regulation of common resources is fishing quotas. Fishing quotas limit the amount of fish that can be caught in a given area to prevent overfishing, which would deplete the resource. Without these regulations, overfishing can occur because fishermen do not have an incentive to limit their catch.
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