A private good is defined in economics as "an item that yields positive benefits to people"[1] that is excludable, i.e. its owners can exercise private property rights, preventing those who have not paid for it from using the good or consuming its benefits;[2] and rivalrous, i.e. consumption by one necessarily prevents that of another. A private good, as an economic resource is scarce, which can cause competition for it.[3] The market demand curve for a private good is a horizontal summation of individual demand curves.[4]
These cheeses are private goods. They are rivalrous, as the same piece of cheese can only be consumed once. They are also excludable, as it is possible for the store prevent someone, such as a non-customer who will not pay the price, from consuming the cheese, as it is privately owned.
Unlike public goods, such as clean air or national defense, private goods are less likely to have the free rider problem, in which a person benefits from a public good without contributing towards it. Assuming a private good is valued positively by everyone, the efficiency of obtaining the good is obstructed by its rivalry; that is simultaneous consumption of a rivalrous good is theoretically impossible. The feasibility of obtaining the good is made difficult by its excludability, which means that is people have to pay for it to enjoy its benefits.[5]
One of the most common ways of looking at goods in the economy is by examining the level of competition in obtaining a given good, and the possibility of excluding its consumption; one cannot, for example, prevent another from enjoying a beautiful view in a public park, or clean air.[6]
An example of the private good is bread: bread eaten by a given person cannot be consumed by another (rivalry), and it is easy for a baker to refuse to trade a loaf (exclusive).
To illustrate the horizontal summation characteristic, assume there are only two people in this economy and that:
Person A will purchase: 0 loaves of bread at $4, 1 loaf of bread at $3, 2 loaves of bread at $2, and 3 loaves of bread at $1
Person B will purchase: 0 loaves of bread at $6, 1 loaf of bread at $5, 2 loaves of bread at $4, 3 loaves of bread at $3, 4 loaves of bread at $2, and 5 loaves of bread at $1
As a result, a new market demand curve can be derived with the following results:
Price per loaf of bread
Loaves of bread
Person A
Person B
Total
$6
0
0
0
$5
0
1
1
$4
0
2
2
$3
1
3
4
$2
2
4
6
$1
3
5
8
References
^Nicholson, Walter (2004). Intermediate Microeconomics And Its Application. United States of America: South-Western, a division of Thomson Learning. p. 59. ISBN0-324-27419-X.
^Ray Powell (June 2008). "10: Private goods, public goods and externalities". AQA AS Economics (paperback). Philip Allan. p. 352. ISBN978-0-340-94750-0.{{cite book}}: CS1 maint: date and year (link)
^Hallgren, M.M.; McAdams, A.K. (1995). "A model for efficient aggregation of resources for economic public goods on the internet". The Journal of Electronic Publishing. 1. doi:10.3998/3336451.0001.125.
^Malkin, J.; Wildavasky, A. (1991). "Why the traditional distinction between public and private goods should be abandoned". Journal of Theoretical Politics. 3 (4): 355–378. doi:10.1177/0951692891003004001. S2CID 154607937.
^"Rivalry and Excludability in Goods". Living Economics. Retrieved October 22, 2011.
March 01, 2023
private, good, private, good, defined, economics, item, that, yields, positive, benefits, people, that, excludable, owners, exercise, private, property, rights, preventing, those, have, paid, from, using, good, consuming, benefits, rivalrous, consumption, nece. A private good is defined in economics as an item that yields positive benefits to people 1 that is excludable i e its owners can exercise private property rights preventing those who have not paid for it from using the good or consuming its benefits 2 and rivalrous i e consumption by one necessarily prevents that of another A private good as an economic resource is scarce which can cause competition for it 3 The market demand curve for a private good is a horizontal summation of individual demand curves 4 These cheeses are private goods They are rivalrous as the same piece of cheese can only be consumed once They are also excludable as it is possible for the store prevent someone such as a non customer who will not pay the price from consuming the cheese as it is privately owned Unlike public goods such as clean air or national defense private goods are less likely to have the free rider problem in which a person benefits from a public good without contributing towards it Assuming a private good is valued positively by everyone the efficiency of obtaining the good is obstructed by its rivalry that is simultaneous consumption of a rivalrous good is theoretically impossible The feasibility of obtaining the good is made difficult by its excludability which means that is people have to pay for it to enjoy its benefits 5 One of the most common ways of looking at goods in the economy is by examining the level of competition in obtaining a given good and the possibility of excluding its consumption one cannot for example prevent another from enjoying a beautiful view in a public park or clean air 6 Definition matrix EditMain article Goods Goods classified by exclusivity and competitivenessExample of a private good EditAn example of the private good is bread bread eaten by a given person cannot be consumed by another rivalry and it is easy for a baker to refuse to trade a loaf exclusive To illustrate the horizontal summation characteristic assume there are only two people in this economy and that Person A will purchase 0 loaves of bread at 4 1 loaf of bread at 3 2 loaves of bread at 2 and 3 loaves of bread at 1 Person B will purchase 0 loaves of bread at 6 1 loaf of bread at 5 2 loaves of bread at 4 3 loaves of bread at 3 4 loaves of bread at 2 and 5 loaves of bread at 1As a result a new market demand curve can be derived with the following results Price per loaf of bread Loaves of breadPerson A Person B Total 6 0 0 0 5 0 1 1 4 0 2 2 3 1 3 4 2 2 4 6 1 3 5 8 References Edit Nicholson Walter 2004 Intermediate Microeconomics And Its Application United States of America South Western a division of Thomson Learning p 59 ISBN 0 324 27419 X Ray Powell June 2008 10 Private goods public goods and externalities AQA AS Economics paperback Philip Allan p 352 ISBN 978 0 340 94750 0 a href Template Cite book html title Template Cite book cite book a CS1 maint date and year link Hallgren M M McAdams A K 1995 A model for efficient aggregation of resources for economic public goods on the internet The Journal of Electronic Publishing 1 doi 10 3998 3336451 0001 125 Public Goods Demand AmosWEB Encyclonomic WEB pedia AmosWEB LLC Retrieved 23 October 2011 Malkin J Wildavasky A 1991 Why the traditional distinction between public and private goods should be abandoned Journal of Theoretical Politics 3 4 355 378 doi 10 1177 0951692891003004001 S2CID 154607937 Rivalry and Excludability in Goods Living Economics Retrieved October 22 2011 Retrieved from https en wikipedia org w index php title Private good amp oldid 1120099601, wikipedia, wiki, book, books, library,
