Four Types of Goods and Two Characteristics - Video Tutorials & Practice Problems
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Two Characteristics:Rivalry in Consumption and Excludability
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Hey guys have you ever considered the difference between a cheeseburger and the U. S. Court system? Well in this video we're gonna finally find the answer and distinguish between the two? Let's do that. Alright. So what we're gonna do in this unit is we're gonna start splitting up goods into different categories. Okay. And we're gonna we're gonna do this split based on two traits. We're gonna have the trait of rivalry and consumption and the trait of exclude ability. Okay so based on these two traits we're gonna break the goods up into four different categories. So let's go ahead and start with the first trait, rivalry in consumption. So when you think of something rival in consumption, right? That word rival, right? It's like an enemy, right? Someone else is your enemy in the consumption of this product? Right? So the idea here is that only one person, right? There can only be one. It's kind of like the highlander here. Only one person can consume each unit of the good. Right? So when something's rival in consumption one person can consume the good. So what's an example of a rival? Good? Well in this case we're gonna have that cheeseburger, right? A cheeseburger is is a rival. Good, Right? Because the cheeseburger? If I eat a cheeseburger you can't eat that same cheeseburger, right? I'm the only one that gets to eat the cheeseburger, right? There's one person that can consume each unit of the good. So you can imagine the opposite of a rival good would be a non rival good. Okay so this is gonna be the opposite of a rival. Good. So, can you think of a non rival goods? A non rival Good would be something that when I consume it, it doesn't make it that someone else can't consume that same unit, Right? So this is a little trickier to think about. But a good example of a non rival good is watching netflix. So, if you think about watching a movie on netflix, right? If I were to go on netflix and I watch my favorite movie, uh Reservoir Dogs, I'd say that is probably my favorite movie. If I watch that on netflix, it's not like me watching it, made it. So you can't watch it, right? You can go ahead and you can watch the same movie on netflix and it doesn't affect my consumption. It doesn't affect your consumption, right? It's non rival. We can both consume that same movie without detriment in each other. Cool, so it's a non rival good. When we can all consume the same unit. So let's talk about the other trade exclude ability. So when you think of exclude, right? We're gonna exclude someone from something. It's when a person can be prevented from consuming it right from the person can't use the Good for some reason. And that reason is pretty much always that they did not pay for the good. Okay, so we can exclude people from using the good based on their payment, right? So if they didn't pay their gonna be excluded. So what's an example of an excludable good? Well a good example to follow with that. Netflix is still the idea of netflix being excludable here. So netflix can be an excludable Good. Right? Because netflix charges you to watch the movies. If I wanted to watch Reservoir Dogs on netflix, they would ask me for my sign up my password, right? They would need to make sure that I'm paying them money before they let me see the movie. So netflix can exclude you from their goods from the movies based on whether you paid or not. Right? And I know a lot of you are sharing netflix accounts bad on you. Right? Pay netflix their money. Just kidding. I do the same thing. Example of a so if you guys excludable, what do you think the opposite here is gonna be? Wow, I can't believe you got that non excludable. Right? So this is gonna be the opposite of an excludable good is a non excludable good. Alright. Can any of you think of an example of a non excluded right? This is a good that you can't keep people from using it, right? You can't keep them from using it even if they paid or did not pay. They can they're gonna be able to use it anyways. It's pretty tough. Right? It's kind of tough to think of something that's non excludable. Right? Oh whoa Hey that's a great example. I don't know who said that, but National Defense, I don't know where you came up with that, but that is actually a great example of a non excludable. Good. Right? So if you think about it, if the government wants to protect you know, your neighbors, right? Everyone around you from some kind of missile coming at you, they can't protect your neighbors but not you right, They're gonna have to protect everybody, right? You can't exclude uh somebody from being defended from national defense. If you're inside the nation, you're gonna be defended. They can't say, oh we're gonna protect everybody except you. You're not protected from this missile, right? They can't do it. So National Defense, that's a great example of a non excludable. Good. Cool. So we've seen the two traits here, right, rivalry in consumption and exclude ability. So we've got the traits and their opposites. Alright, so now what we're gonna do is we're gonna take those traits and we're gonna define four types of goods based on the different combinations of these traits. Alright, let's go ahead and do that in the next video
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The Four Types of Goods:Private Goods, Club Goods, Common Resources, and Public Goods
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11m
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Alright, so let's go ahead and define those four types of goods on this graph, or excuse me, on this table, you'll see that I've split it up, we've got along the top, we've got excludable and non excludable and along the left hand side, rival and non rival. Right? So based on this combination, we're gonna get different types of goods. Let's start here in this top left corner. Excludable and rival. When a good is excludable and rival, right? That means only one person can consume it. And you could be you can be made to pay for it, right? You can't consume it unless you paid. So, these are our private goods, right? Excludable and rival. And here a private Good right cheeseburger, right? If there's if there's a cheeseburger, right? If I eat the cheeseburger, you can't eat it, right? That's the rivalry. And generally you're gonna have to pay for the cheeseburger, right? You can't eat the cheeseburger unless you paid for it first. So, a cheeseburger is a great example of a private good, right? And this kind of extends to all food and drink in general, Right? Any kind of food or drink, if I eat it, you can also eat it, right? So they're gonna be rival and they're gonna be excludable, right? Because you can charge for this food. Cool. So that's a very common example, but we have, you know, all sorts of random goods can be private goods. All sorts of household goods, I'm just gonna throw one out a pair of jeans, right? A pair of jeans. If I'm wearing the jeans, you can't wear the jeans to write their rival. Only one person can wear the jeans and their excludable because you have to pay for the genes, Right? So, private good genes there. And how about a house? Even the house? The household goods and the house itself is a private good, right? If I live in the house with my family, I can exclude you because you didn't pay to live there, right? You can't come in my house unless you have paid to live there. Right? So, I can exclude people that I don't want in my house and its rival, Right? If my family is living there, your family can't live there too. We're already living in the house, there's not enough space for everybody. So it's rival. Right? There's only so much space in there. Cool, So, those are our private goods. Right? And there's some examples there. Um, let's go on down to this next box below it. Club goods. Okay, so, these are goods that are excludable, right? So, this is still a case where you can force people to pay before they can use the Good, but their non rival in this case, right? If I use the Good, it doesn't keep you from using that same unit. Now, before we get into these examples of club goods, I want to make a note that club goods is like, some reason, like, nobody could agree on, like the name for these things. So, there's also different names for club goods, quasi public goods near public goods, artificially scarce goods. Natural monopoly goods? Non right? Look at all these crazy names, but club goods seems to be the most commonly used universally. Okay, so, we're gonna go with club goods in our in our examples. And I do actually like this name a lot to this artificially scarce goods. All right. Because the idea here is that they're artificially scarce because they're they're being scarce because of the payment because there's this payment involved. Alright, So let's look at some examples and you'll see kind of how this artificially scarce idea makes sense. So, let's think of Club goods. The first one that's a good example is the one we've already been talking about the idea of netflix, right? To get netflix, you have to pay, right? You have to have a subscription. So you're paying monthly they're excluding people who do not pay for netflix, right? But it's non rival. Right? Me watching a movie on netflix doesn't stop you from watching the same movie on netflix. Right? So, think about that. It's artificially scarce right there? Making it. So, it's like, this movie is hard to get to, even though there's no reason that everybody couldn't watch it. There's no extra cost to them. For me watching it. You watching it? Everyone else watching it, right? There's no extra cost at that point. So it's artificially scarce because of this kind of club mentality right? Where there's you have to join the club, you have to join netflix to get access. Cool, So netflix, cable tv, all sorts of things like that. Right. Another good one is a toll road. So, if you think about a toll road, um, this is a great example of a club good, right? Because it can exclude people, right? Because if you didn't pay to go on the toll road, you can't use the toll road, but it's non rival. Right? Me driving down the toll road doesn't affect you driving down the toll road. Well, assuming there's no traffic. Right? So I'm gonna go ahead, I'm just gonna put in here un congested, like there's no traffic, right? Because I could see one of you, you know, being a real stickler and saying, what if the toll road is really congested and there's a lot of traffic on the toll road, then me using the toll road does affect you, right? Because if the toll roads full of traffic and I try and get on the toll road now, now we're fighting for that same space, so it becomes rival in a sense. So to not deal with all that, let's not even think about that, let's say that the toll road is un congested, right? Me driving down the toll road doesn't affect you. So in this case it's non rival, right? Um, we're not gonna fight for the road space and it's excludable because we had to pay to use it. So we joined the club, we joined the toll road club. Cool. How about the last one here? Some of you might be familiar with this one. How about frat parties, frat parties are a club good as well, Right? If you go to a frat party, you'll see that people are generally excluded, right? If you didn't join the frat, you're probably not going to be going to the party if you're a dude. Um, and their non rival, right? Everyone who's at the party doesn't get affected by other people at the party, right? By me going to the party. It doesn't affect you having fun at the party also. Right, So they're non rival. Good. This party, it doesn't affect, you know, there's one quantity of party and we're both able to go and use that same party. Cool. So you got to join the club right? To get access to any of these goods, netflix, toll roads frat parties. These are all club goods. Cool, Well, let's go ahead. And um, yeah, let's go ahead and go to the other side here to common resources. So let's go up to this top box where we've got non excludable and rival. Right? So think about it here, They're non excludable. So you can't keep someone from using it even if they didn't pay, right? But their arrival. So me using it makes it so you can't use the same one, a great example here is fish in the ocean, right? There's a bunch of fish in the ocean. But if I can go out there and catch a fish, right, no one's gonna stop me from catching a fish. If I go out into the ocean with my boat and catch the fish, no one's gonna stop me. But if I catch that fish, you can't catch the same fish, right? That fish is rival. Right? So we've got this rival situation where I caught a fish, you no longer can catch it and it's non excludable. No one can stop me from going out there and catching the fish. Cool. So fish in the ocean. Great example. Another one would be our clean air. Right? So the the clean air um that we have is also a rival. Non excludable. Good. Right? So the idea is it's not excludable, no one can stop you from using the air, right? For good or for bad, right? There's also the chance that someone could pollute the air. A factory can go ahead and pollute the air and that's gonna be rival, right? They're taking away my clean air. There was this much clean air and they took some of it away. Now I no longer have it. So we're fighting for this clean air and it's not excludable. We can't stop the factory from using that air just like they can't stop us from using it, right? So that air and kind of just basically things in the environment in general, we're going to see are pretty much common resources. They're going to be things that are rival and non excludable. So just like the fish in the ocean, right? The fish in the ocean are a common resources. But what about the dating scene? Right? There's plenty of fish in the ocean in our dating scene. We've got a rival non excludable, right? If I'm dating someone essentially you can't date the same person, right? So we're gonna have that rival situation, but it's non excludable. You can't keep someone out of the dating scene. Everyone can come into the dating scene and try and find a partner there, right? Um So it's gonna be rival and non excludable. Cool. So that's common resource there. Let's finish up here with public goods. Alright, So the first public good. So one of you have this great example above of this non rival, non excludable good of National defense. So, national defense is a great example of a public good. So if you think about it, right? Like we said, you can't exclude someone from national defense. If you're gonna if you're gonna protect the neighbor, you have to protect the other person to write. You can't leave someone out of that protection and it's non rival, right? For me being protected, it doesn't say stop you from being protected by the same defense, right? We're both protected by the same military or whatever. And we're both being protected by that same national defense? Me being protected doesn't stop you from being protected, Right? So non rival and non excludable national defense, Another great one is the court system. So here we finally bring that analogy from the beginning of the lesson altogether. We finally compared a cheeseburger to a court system here, right? A cheeseburger being a private good and a court system being a public good. So now, you know, if anyone ever asked you what is the difference between a cheeseburger and the court system, you've got a perfect answer. Well, let me tell you something about rivalry and exclude ability, right? And you can give them this whole long spiel about the cheeseburger and the court system. So here we go. The court systems public Good. Right? Because um first it's non excludable right? It's available for everyone. Everyone is allowed to take a claim to court. And that's part of our uh U. S. Court system, right? That's part of the freedoms that we have here. And it's non rival. Me using the court system doesn't make it. So you can't use the court system, right? It's available there for everybody. It's a non rival and non excludable. Cool, Last one here, um a public good would be So we had the toll road being a club good, right? Because there is a the toll. It makes it excludable. But what about a public road? And here we're still gonna say it's un congested here. Right. I don't want to deal with this idea of traffic. So, it's just a clear road, a public road, right? You can't exclude anyone from using it. It's a public road, everyone's allowed to use it. Right? So public road right there behind me, um it's non excludable and it's non rival. Right? When it's un congested, me using the road doesn't stop you from using the road, Right? So we're both able to use the road. Non rival. Non excludable. So here you go, these are the four types of goods um that we're going to deal with here. Private goods, club goods, common resources and public goods. Now, before we move on, I want to make a quick note about these non excludable goods, common resources and public goods, we're going to see that there's gonna be some problems, these guys are gonna need help. Alright by themselves. They're gonna struggle. They're gonna struggle to be brought to market or they're just gonna generally be overused. Okay. And we're gonna see these details in future videos. Okay? But I just want to point out now that these non excludable things. Common resources and public goods. They are going to need help. Alright, so let's go ahead and move on to the next video
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Problem
Problem
Label the goods as Private Goods (PRI), Common Resources (CR), Club Goods (CG), or Public Goods (PUB).
