externalities
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Externalities
EconomicsUnit 2
Rival vs. Nonrival Goods
A product is rival when consumption by one person reduces the amount available to others.
A nonrival good can be simultaneously or jointly consumed by people without reducing the amount available to others.
Excludable vs. Nonexcludable
A good is excludable if its use is easily limited to those who pay to use it.
A nonexcludable good or service can be used even by people who do not pay for it.
Ex. a good might be excludable but nonrival and vice versa.
External Costs
Some benefits or costs can fall on “third parties”- people or firms other than the producers and paying consumers of the products
Pollution, landscaping, etc. External loss or benefit Free riding?!
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