Define the term ‘public good’ and explain why public goods suffer from the ‘free rider’ problem.

A public good is a good that is both non-rivalrous and non-excludable. Non-rivalrous can be defined as “consumption by one person does not reduce the amount available to other people” and non-excludable as “once the good is provided people cannot be prevented from consuming it.” The ‘free rider’ problem is the issue that arises when once a public good is provided to one individual, it is provided to everyone because of its non-excludable nature. Therefore, the rational consumer will wait for someone else to provide the good so they can benefit at no cost, hence ‘free ride’. The result is the good is never provided by the free market, and therefore requires government intervention. An example of this are streetlights.

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Answered by Belinda S. Economics tutor

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