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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

People have a demand for sweaters, and the market provides sweaters. There is evidence that people also have a demand for national defense, but the market does not provide it. Why doesn’t the market provide national defense? Is it because government is providing national defense and therefore there is no need for the market to do so? Or is it because the market can’t provide it?

To determine

Reason why market does not provide national defense when people demand it.

Explanation

National defense is not a common product like sweater. National defense is a public good and sweater is a private good. A public good refers to those goods that have the characteristics of non-rivalry and non-excludability in nature. One person’s consumption should not reduce the availability for the other person. In other words, it is not possible to restrict other people from availing the goods they desire...

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