Public Goods and Private Goods



Public Goods and Private Goods

Introduction

On one hand, economists define public goods as non-rivalry and non-excludable goods. The consumption of these goods by one person does not have any effect on the consumption of the other person (Andersen, 2007). Public goods are completely owned by the government. In addition, nobody can prevent anyone to use these goods. In other way we can define public goods as, the addition of one more person to the markets of public goods has cost of $0 or the person who does not actually pay for public goods can benefit from it. On the other hand, the private goods are excludable and rival. BMW can be an example of Private good. BMW has produced five series Sedans which cannot be owned by everyone. The owner of BMW is not required to allow everyone or anyone else except him to rise or drive his car (Batina, et al., 2005).

In this paper we will discuss the advantages and disadvantages of Public goods and private Goods. In addition, we will discuss that as consumer how can we benefit from public and private goods and what rare the effects of these goods on economy, markets and the consumers.

Discussion

Pros and Cons of Public Goods

Since, several people reap the benefits of same public goods, thus these goods have shared consumption. People who do not have buying power can also reap the benefits of public goods. Public goods are not produced in private markets. Since, it is not possible to produce sufficient public goods in private market to reach the optimum and efficient level of outcomes. It happens, since most of the people will consume these goods without paying for them. As a consequence government is required to usually take over the decision regarding how much of these products should be produced. In few cases, the government in actual produces these goods and in some cases, it pays the private sector to produce them (Burkhead & Miner, 2007).

Let's take the example of national defense. National defense is not rival consumption products as it protects the whole nation from invading armed attacks and it does not reduce the amount of protection for other countrymen. It is just impossible to provide national defense to only one person or specific people in the country who pay for the national defense, while leaving others unprotected who do not pay. Rather the governmental tax imposition broadly to pay for the national defense is a way to generate funds for protecting national sovereignty and other public goods (Meyer, 2010).

Pros and Cons of Private Goods

Private goods facilitate freedom in politics and they have economic freedom. The private goods are manufactured by private firms and theses firms lead to powerful economy. Private goods bring in efficiency in the market. The societies earn incentives to be efficient in producing such goods that are in demands (Geuss, 2009). These incentives facilitate competition in the economy and the firms are required to curb their costs and wastages in ...