Cambridge International as and a level Economics Ebook

1
Excludability:
It is possible to exclude some people 
from using a private good. This is normally done through 
charging a price. If the price is not acceptable, then 
that good will not be consumed. Once a private good has 
been purchased by one person it cannot be consumed 
by others.
2
Rivalry:
The consumption by one person reduces the 
availability for others. In some ways it seems obvious that 
when we purchase food, clothes or a textbook then this 
means that fewer of these goods are available for purchase 
by others.
Rivalry: 
where consumption by one person reduces 
availability for others.
KEY TERM
We can also recognise what are known as free goods. 
Th
ese have zero opportunity cost since consumption is 
not limited by scarcity.
 
Th
ey have no prices – as their 
name indicates – and in theory, no factors of production 
are required to produce them. It is not easy to think of 
examples! In some economies, wild fruit and berries may 
be gathered or some animals hunted for their meat. Th
e 
air we breathe could also be seen as a free good along with 
water in a local river.
Public goods
Th
ere are two specifi c characteristics of a 
public good
. 
Th
ese are:
1
It must be 
non-excludable
.
 
This means that once the good 
has been provided for one consumer, it is impossible to stop 
all other consumers from benefitting from the good.
2
It must also be
 non-rival
. As more and more people 
consume the good, the benefit to those already consuming 
the product must not be diminished.
Public good: 
one that is non-excludable and non-rival and 
for which it is usually diff icult to charge a direct price.