Private Goods & Services

What makes a good or service private?

• Individual must directly pay for it• Owner can exclude non payers• It can lose its benefit to others if it is

used• For example….

Public Goods & Services

What makes a good or service public?

• Everyone in society can use it• Impractical to pay for it individually• Impractical to exclude non payers• Can be used as many times without

reducing the benefit to others• For example….

What are the benefits of this…?

You Decide

You sure about that last one…

• H:\AP Economics\Unit V (Market Failure & Role of Gov)\Fire Station Aritcle.docx

When do governments decide to produce something as a public good

or service?

TWO FACTORS MUST BE MET!

2 factors for a good or service to be public

If the individual paid for the good, the

benefits would be less than the cost

If the government paid for the good, the

total benefits to society would be

greater than the cost

Do you think ALL education should be a private service?

• On a separate sheet of paper, write an economic report that answers this question.

• Your report should include some graphical explanations.

• Things to consider– Impact on quantity, price– Impact on school environment– Impact on the community– Will a shortage and/or surplus occur?– etc