Advantages And Disadvantages Of Public Goods

Better Essays
Public good is an item whose consumption is determined by society not by individual consumers. Examples include national defense, law enforcement, parks. These goods are financed by taxes because they are created for the welfare of public. Basically the goods which can be consumed without reducing its availability to other individual and the other one is not excluded are public goods. The vice versa of these goods are private goods. A private good is a product that must be purchased to be consumed and its consumption is done by one individual. For instance, candies: the person who would be purchasing them , would be having not the person did not purchased.
A public good is an item consumed by society as a whole, for instance defense. This would be for every citizen for the country, even the person who did not pay the tax. This gives us the one characteristic of public good that is NON- EXCLUDABLE. These goods are being produced for the welfare of the whole society rather than focusing on one individual. While
…show more content…
But the brewery would be willing to pay the chemical factory to reduce the amount of effluent, because this will reduce the costs of brewery industry. Such a reduction in effluent may reduce the chemical industry’s profits, as the firm’s output of chemicals and the effluents are in fixed proportions and any reduction of effluent, thus, requires a reduction in output of the chemical industry. If the reduction in the brewery industry’s costs exceeds the reduction in the chemical factory’s profit, there are potential gains from trade and the original level of effluent cannot have been efficient. This observation leads to a possible solution to the externality problem presented by
Get Access