Public goods can cause problems in the market for a couple of key reasons:
Non-excludability: This means that once a public good is available, no one can be stopped from using it. For example, think about streetlights. Since everyone benefits from them, people might wonder why they should pay for them.
Non-rivalry: This means that when one person uses a good, it doesn't take away from someone else’s ability to use it. Because of this, some important goods are produced in too small amounts.
These two reasons lead to a situation where resources aren't used properly. As a result, important items that we all need, like public parks or national defense, often aren't provided enough.
Public goods can cause problems in the market for a couple of key reasons:
Non-excludability: This means that once a public good is available, no one can be stopped from using it. For example, think about streetlights. Since everyone benefits from them, people might wonder why they should pay for them.
Non-rivalry: This means that when one person uses a good, it doesn't take away from someone else’s ability to use it. Because of this, some important goods are produced in too small amounts.
These two reasons lead to a situation where resources aren't used properly. As a result, important items that we all need, like public parks or national defense, often aren't provided enough.