Question

What are the two key characteristics of public goods?

Short answer

The two key characteristics of public goods are non-excludability and non-rivalry. Non-excludability means that once these goods are provided, everyone can benefit from them without any restrictions. Non-rivalry means that they can be consumed by multiple individuals simultaneously without reducing the overall availability or quality for others.

Step-by-step solution

Define Public Goods

Public goods are non-excludable and non-rivalrous goods that are typically provided by the government for the consumption of all members of a society. These goods are available to everyone and its consumption by one person does not reduce the availability or quality for others.

Explain Non-Excludability

The first key characteristic of public goods is non-excludability. Non-excludable goods are those that cannot be limited to only specific individuals or groups. Once these goods are provided, everyone in the society can benefit from them, regardless of whether they pay for them or not. For example, clean air, public parks, and streetlights are all non-excludable in nature, as they are accessible to all without any restrictions.

Explain Non-Rivalry

The second key characteristic of public goods is non-rivalry. Non-rivalrous goods are those that can be consumed by one person without reducing the availability for others. This means that multiple individuals can consume these goods simultaneously without any negative impact on their overall availability or quality. Examples of non-rivalrous goods include public broadcasting services and national defense, as the consumption of these goods by one person doesn't reduce their availability or quality for others. In conclusion, the two key characteristics of public goods are non-excludability and non-rivalry, which make them unique and essential for a well-functioning society.