Unlike private products, such as national defense, the national weather service, the Centers for Disease Control, or a municipal mosquito-control program, public goods are nonrival in consumption. The quantity accessible to others is unaffected by one person's intake.
Once created, such products are distributed in an equal amount to all consumers; the goods may be given to a new customer at no marginal cost. However, once a public product is created, providers cannot simply refuse to provide it to individuals who do not pay. For public goods, there are no vending machines. If a company sprays an area for mosquitoes, for example, everyone in the neighborhood benefits. The company can't quickly dismiss individuals who don't follow the rules.
Nonprofit organizations occasionally provide public benefits, which they support through donations and other forms of money.
The economy, however, is made up of more than simply the two extremes of private and public goods. Some products are not only unique, but they are also nonrival. Additional homes, for example, can watch a TV show without interfering with the reception of other viewers. It's not as if there's a certain amount of TV signal available. In terms of consumption, television signals are unrivaled. However, the program's creators may charge each home for the reception, similar to cable TV, ensuring that the TV signal is nonrival but exclusive.
Nonprofit organizations occasionally provide public services, which they fund with donations and other financial resources.
However, the economy consists of more than only the two extremes of private and public goods. Some items are not just one-of-a-kind, but also unrivaled. For example, more houses can watch a television show without interfering with the reception of other viewers. It's not as if there's a limit to the number of TV signals that can be received. Television transmissions are unparalleled in terms of usage. However, similar to cable television, the program's makers may charge each home for the reception, guaranteeing that the TV signal is nonrival but exclusive.
Other goods are competitors, but they are not exclusive. In the ocean, fish are rivals in the sense that once one is caught, it is no longer available for others to catch; the same is true for migratory games such as geese. Ocean fish and migratory game, on the other hand, are nonexclusive in the sense that blocking access to these products would be costly, if not impossible. An open-access good is one that is competitive but not exclusive. The next chapter will look at the issues that arise with open-access goods.
Exhibit 1 categorizes the four types of products. Products are categorized as rival or nonrival across the top, while exclusive or nonexclusive goods are classed along the left margin. The private sector is usually the source of private goods.
Natural monopolies can be given by the private sector, such as a private golf course, or by the government, such as a municipal golf facility. Open-access commodities are generally controlled by the government. And, in most cases, the government provides public goods.
Because private products are consumed in competition, the market demand for a private item at a given price is equal to the total of the amounts sought by each customer. When the price is $10, for example, the market amount of pizza required equals the quantity demanded by Alan plus the quantity demanded by Maria plus the quantity demanded by all other market customers. The horizontal sum of individual demand curves is the market demand curve for a private good, as shown in Exhibit 7 of Chapter 6. The effective amount of a private commodity is determined by the intersection of the market demand and supply curves.
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