Economic goods, free goods, Public Good, Private Good

Ø Economic goods and free goods:

·        The vast majority of goods and services are what economists call economic goods. An economic good is one which takes resources to produce it. As a result, its production involves an opportunity cost. Thus the possession of those goods require financial payments.

·        Free goods are abundant in nature. They do not involve the use of resources to produce them and so they do not have an opportunity cost. Thus the possession of those goods require no financial payments as  such. Examples include sunlight and air.

Ø What is a 'Public Good'?

A public good is a product that one individual can consume without reducing its availability to another individual, and from which no one is excluded. Economists refer to public goods as "nonrivalrous" and "nonexcludable." National defense, sewer systems, public parks and other basic societal goods can all be considered public goods.

   Ø Characteristics of public goods:

There are two specific characteristics of a public good.

·        It must be non-excludable. This means that once the good has been provided for one consumer, it is impossible to stop all other consumers from benefitting from the good.

    Ø It must also be non-rival. As more and more people consume the good, the benefit to those already consuming the product must not be diminished.

Ø What is a 'Private Good'?

A private good is a product that must be purchased to be consumed, and its consumption by one individual prevents another individual from consuming it. Economists refer to private goods as rivalrous and excludable. A good is considered to be a private good if there is competition between individuals to obtain the good and if consuming the good prevents someone else from consuming it.