Private goods definition

Four Types of Goods

Public Good

Economists define a public good as being non rival and non excludable. The non rival part of this definition means that my consumption does not affect your consumption of a good; I do not "use it up". The non excludable portion of this definition means that I cannot prevent you from consuming a good. Another way of understanding this concept is saying that adding an additional person to the public goods market has a marginal cost of $0. In other words, even those who do not explicitly (actually) pay for the good can benefit from the good.

Private Good

A private good IS rival and excludable. An an example of a private good is my professor's car. BMW has manufactured a fixed number of 5 series sedans; there are not enough built for everyone to own one. My professor's BMW is also excludable; he does not have to allow anyone else to drive or ride in his car.

Mixed Good

Some goods have elements of both public and private goods.

Common Pool Resource

A perfect example of this type of good is a local fishing hole. The fishing hole has the non excludable element of public goods (we cannot exclude certain people from fishing in the public place), but also has the rival element of a private good (There is a limited amount of fish in the pond). This type of good is called a common pool resource. Here, because each individual only catches a small fraction of the total number of fish, we see people over fishing the pond. This over fishing may lead to the depletion of the fishing utility offered by the pond.

Club Goods

On the other hand, club goods are non rival, but are excludable. An example of a club good is cable TV. Your use of cable TV does not limit my ability to also view television shows on cable; as long are you live in an area where the necessary cable is present, you can get cable TV. However, it is excludable in that you have to pay the monthly fee. This is an example of an industry with a relatively flat marginal cost schedule; adding an additional user faces a small marginal cost.

Goods Continium

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Goods Matrix

Back to Public Goods

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Q&A

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What is the definition of Privatization.

Privatization is the transfer of ownership from the public sector (government) to the private sector (business).


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