Can You Explain The Concept Of Public Goods With Good Examples?


1 Answers

Tariq Habib Profile
Tariq Habib answered
While negative externalities like pollution and global warming command most of the headlines, positive externalities may well be economically more significant. Important examples of positive externalities are construction of highway network, operation of a national weather service, support of basic science, and provision of measures to enhance public health. These are not goods, which can be bought and sold in markets. Adequate private production of these public goods will not occur because the benefits are so widely dispersed across the population that no single firm or consumer has an economic incentive to provide the service and capture the returns.
The extreme example of a positive externality is a public good. Public goods are commodities for which the cost of extending the service to an additional person is zero and which it is impossible to exclude individuals from enjoying. The best example of a public good is national defence. When a national protects its freedom and way of life, it does so for its inhabitance, whether they want the protection or not and whether they pay for it or not.
Because private provision of public goods is generally insufficient, government must step in to encourage the production of public goods. In buying public goods like national defence or lighthouse, government is behaving exactly like any other large spender.

Answer Question