Economics Principles Goods, Bads and Public Goods

January 27, 2011

Goods – 1 The Science of Economics

Basic Economic Economics is the study of choice under conditions of scarcity or the Problem • Definition study of choice with constraints.

Goods and Services

Goods – 2 The Science of Economics

Basic Economic Economics is the study of choice under conditions of scarcity or the Problem • Definition study of choice with constraints.

Goods and Services How does scarcity relate to resources?

Goods – 2 The Science of Economics

Basic Economic Economics is the study of choice under conditions of scarcity or the Problem • Definition study of choice with constraints.

Goods and Services How does scarcity relate to resources?

How does scarcity relate to the environment?

Goods – 2 The Science of Economics

Basic Economic Economics is the study of choice under conditions of scarcity or the Problem • Definition study of choice with constraints.

Goods and Services How does scarcity relate to resources?

How does scarcity relate to the environment?

How does scarcity relate to sustainability?

Goods – 2 The Science of Economics

Basic Economic Economics is the study of choice under conditions of scarcity or the Problem • Definition study of choice with constraints.

Goods and Services How does scarcity relate to resources?

How does scarcity relate to the environment?

How does scarcity relate to sustainability?

Specifically we say that economics is the study of how individuals and societies choose to employ scarce resources that could have alternative uses to produce goods and services, and distribute them, now or in the future, among various individuals and groups in society.

Goods – 2 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation Actually the consumption of some goods may decrease the • Utilities1 well-being or utility of an individual. • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation Actually the consumption of some goods may decrease the • Utilities1 well-being or utility of an individual. • Utilities2 • Resources • Three Types Maybe we should call those goods • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation Actually the consumption of some goods may decrease the • Utilities1 well-being or utility of an individual. • Utilities2 • Resources • Three Types Maybe we should call those goods BADS • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation We usually think of goods as being physical objects. • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation We usually think of goods as being physical objects. • Utilities1 • Utilities2 • Resources A service is the non-material equivalent of a good. • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation We usually think of goods as being physical objects. • Utilities1 • Utilities2 • Resources A service is the non-material equivalent of a good. • Three Types • Capital We usually think services as intangible entities. • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation We usually think of goods as being physical objects. • Utilities1 • Utilities2 • Resources A service is the non-material equivalent of a good. • Three Types • Capital We usually think services as intangible entities. • OC • ExampleOC • ResourceCost A service is a set of benefits delivered from a service provider, which • Rival • NonRival are generated by • Excludable • Nonexcludable • Public 1) the functions of technical systems, • Categories • Categories I • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation We usually think of goods as being physical objects. • Utilities1 • Utilities2 • Resources A service is the non-material equivalent of a good. • Three Types • Capital We usually think services as intangible entities. • OC • ExampleOC • ResourceCost A service is a set of benefits delivered from a service provider, which • Rival • NonRival are generated by • Excludable • Nonexcludable • Public 1) the functions of technical systems, • Categories • Categories I 2) the natural environment, • Common

Goods – 3 Goods and Services

Basic Economic A good is an object whose consumption increases the well-being or Problem

Goods and Services utility of an individual. • Goods • Products • Differentiation We usually think of goods as being physical objects. • Utilities1 • Utilities2 • Resources A service is the non-material equivalent of a good. • Three Types • Capital We usually think services as intangible entities. • OC • ExampleOC • ResourceCost A service is a set of benefits delivered from a service provider, which • Rival • NonRival are generated by • Excludable • Nonexcludable • Public 1) the functions of technical systems, • Categories • Categories I 2) the natural environment, • Common 3) and/or by distinct activities of individuals.

Goods – 3 Products

Basic Economic Problem We often called goods and services products with the idea that

Goods and Services they are available for consumption due to some process, • Goods natural or manmade. • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 4 Products

Basic Economic Problem We often called goods and services products with the idea that

Goods and Services they are available for consumption due to some process, • Goods natural or manmade. • Products • Differentiation • Utilities1 We say the goods and services are produced. • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 4 Products

Basic Economic Problem We often called goods and services products with the idea that

Goods and Services they are available for consumption due to some process, • Goods natural or manmade. • Products • Differentiation • Utilities1 We say the goods and services are produced. • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 4 Differentiated Products

Basic Economic Problem Products which are the same in all aspects that affect their

Goods and Services ability to influence consumer satisfaction are called • Goods homogeneous. • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 5 Differentiated Products

Basic Economic Problem Products which are the same in all aspects that affect their

Goods and Services ability to influence consumer satisfaction are called • Goods homogeneous. • Products • Differentiation • Utilities1 Products which differ in any aspect that affects their ability to • Utilities2 • Resources influence consumer satisfaction are called differentiated. • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 5 Differentiated Products

Basic Economic Problem Products which are the same in all aspects that affect their

Goods and Services ability to influence consumer satisfaction are called • Goods homogeneous. • Products • Differentiation • Utilities1 Products which differ in any aspect that affects their ability to • Utilities2 • Resources influence consumer satisfaction are called differentiated. • Three Types • Capital • OC We often call homogeneous products commodities to indicate • ExampleOC • ResourceCost that they have little to differentiate them from other products. • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 5 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 6 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Form Utility—Products that differ physically are said to differ in • Utilities2 • Resources form. • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 6 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Form Utility—Products that differ physically are said to differ in • Utilities2 • Resources form. Processing is a common way to change the form utility of • Three Types a good. • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 6 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Form Utility—Products that differ physically are said to differ in • Utilities2 • Resources form. Processing is a common way to change the form utility of • Three Types a good. • Capital • OC • ExampleOC • ResourceCost • Place Utility—Place utility occurs because of the goods • Rival • NonRival physical location or circumstance. • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 6 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Form Utility—Products that differ physically are said to differ in • Utilities2 • Resources form. Processing is a common way to change the form utility of • Three Types a good. • Capital • OC • ExampleOC • ResourceCost • Place Utility—Place utility occurs because of the goods • Rival • NonRival physical location or circumstance. Transportation is the most • Excludable common way to change the place utility of a good. • Nonexcludable • Public • Categories • Categories I • Common

Goods – 6 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Time Utility—Time occurs because of the time at which the • Utilities2 • Resources good will be available for delivery. • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 7 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Time Utility—Time occurs because of the time at which the • Utilities2 • Resources good will be available for delivery. Storage and forward or • Three Types futures contracts are the most common way to change the time • Capital • OC utility of a good. • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 7 Product Utilities

Basic Economic Differentiated products usually differ by form, place, time, or Problem

Goods and Services possession. • Goods • Products • Differentiation • Utilities1 • Time Utility—Time occurs because of the time at which the • Utilities2 • Resources good will be available for delivery. Storage and forward or • Three Types futures contracts are the most common way to change the time • Capital • OC utility of a good. • ExampleOC • ResourceCost • Rival • • NonRival Possession Utility—Possession utility is defined as the • Excludable difference in an otherwise homogenous product that occurs • Nonexcludable • Public because of the terms and conditions of sale and transfer of • Categories title. • Categories I • Common

Goods – 7 Resources

Basic Economic Problem Resources are anything that can be used directly or indirectly

Goods and Services to satisfy human wants. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 8 Resources

Basic Economic Problem Resources are anything that can be used directly or indirectly

Goods and Services to satisfy human wants. • Goods • Products • Differentiation We sometimes call resources factors of production because • Utilities1 they are the things we use to produce products and services • Utilities2 • Resources for consumption. • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 8 Three Types of Resources or Factors of Production

Basic Economic Problem

Goods and Services • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 9 Three Types of Resources or Factors of Production

Basic Economic Problem • Expendable factors of production are raw materials, or Goods and Services produced factors that are completely used up or consumed • Goods • Products during a single production period. • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 9 Three Types of Resources or Factors of Production

Basic Economic Problem • Expendable factors of production are raw materials, or Goods and Services produced factors that are completely used up or consumed • Goods • Products during a single production period. • Differentiation • Utilities1 • Utilities2 • Capital is a stock that is not used up during a single production • Resources • Three Types period, provides services over time, and retains a unique • Capital identity. • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 9 Three Types of Resources or Factors of Production

Basic Economic Problem • Expendable factors of production are raw materials, or Goods and Services produced factors that are completely used up or consumed • Goods • Products during a single production period. • Differentiation • Utilities1 • Utilities2 • Capital is a stock that is not used up during a single production • Resources • Three Types period, provides services over time, and retains a unique • Capital identity. • OC • ExampleOC • ResourceCost • Rival • Capital services are the flow of productive services that can be • NonRival obtained from a given capital stock during a production period. • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 9 Three Types of Capital Resources

Basic Economic Problem

Goods and Services • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation Water, air, minerals, petroleum, coal, flora, fauna, ... • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • • Utilities1 Human Capital—muscle-power, dexterity, abilities, skills and • Utilities2 education embodied in a human being. • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • • Utilities1 Human Capital—muscle-power, dexterity, abilities, skills and • Utilities2 education embodied in a human being. • Resources • Three Types • Capital • OC • Other Capital—other long-lasting resources used to produce • ExampleOC • ResourceCost products and services. • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • • Utilities1 Human Capital—muscle-power, dexterity, abilities, skills and • Utilities2 education embodied in a human being. • Resources • Three Types • Capital • OC • Other Capital—other long-lasting resources used to produce • ExampleOC • ResourceCost products and services. • Rival • NonRival 1. Machinery • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • • Utilities1 Human Capital—muscle-power, dexterity, abilities, skills and • Utilities2 education embodied in a human being. • Resources • Three Types • Capital • OC • Other Capital—other long-lasting resources used to produce • ExampleOC • ResourceCost products and services. • Rival • NonRival 1. Machinery • Excludable • Nonexcludable 2. Irrigation pipe • Public • Categories • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • • Utilities1 Human Capital—muscle-power, dexterity, abilities, skills and • Utilities2 education embodied in a human being. • Resources • Three Types • Capital • OC • Other Capital—other long-lasting resources used to produce • ExampleOC • ResourceCost products and services. • Rival • NonRival 1. Machinery • Excludable • Nonexcludable 2. Irrigation pipe • Public • Categories 3. Stocks of knowledge and information • Categories I • Common

Goods – 10 Three Types of Capital Resources

Basic Economic Problem • Land—physical space together with the natural resources Goods and Services found above, beneath, or on it. • Goods • Products • Differentiation • • Utilities1 Human Capital—muscle-power, dexterity, abilities, skills and • Utilities2 education embodied in a human being. • Resources • Three Types • Capital • OC • Other Capital—other long-lasting resources used to produce • ExampleOC • ResourceCost products and services. • Rival • NonRival 1. Machinery • Excludable • Nonexcludable 2. Irrigation pipe • Public • Categories 3. Stocks of knowledge and information • Categories I • Common 4. Legal rights

Goods – 10 Opportunity Cost

Basic Economic The opportunity cost of any good or service is its value in its next Problem

Goods and Services best alternative use. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 11 Opportunity Cost

Basic Economic The opportunity cost of any good or service is its value in its next Problem

Goods and Services best alternative use. • Goods • Products • Differentiation For example, the opportunity cost of the service of an input used in • Utilities1 the production of any particular commodity is the maximum amount • Utilities2 • Resources that the input would produce of any other commodity. • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 11 Opportunity Cost

Basic Economic The opportunity cost of any good or service is its value in its next Problem

Goods and Services best alternative use. • Goods • Products • Differentiation For example, the opportunity cost of the service of an input used in • Utilities1 the production of any particular commodity is the maximum amount • Utilities2 • Resources that the input would produce of any other commodity. • Three Types • Capital • OC Opportunity costs are usually measured in monetary terms so that • ExampleOC the opportunity cost of any good or service is the maximum amount • ResourceCost • Rival the good or service could receive elsewhere for use as a production • NonRival input or for final consumption. • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 11 Examples of Opportunity Cost

Basic Economic Problem • Use of land owned by the farmer to grow wheat

Goods and Services • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 12 Examples of Opportunity Cost

Basic Economic Problem • Use of land owned by the farmer to grow wheat

Goods and Services • Goods • Products • Use of wife’s labor to gather firewood • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 12 Examples of Opportunity Cost

Basic Economic Problem • Use of land owned by the farmer to grow wheat

Goods and Services • Goods • Products • Use of wife’s labor to gather firewood • Differentiation • Utilities1 • Utilities2 • Use of water for growing padi • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 12 Examples of Opportunity Cost

Basic Economic Problem • Use of land owned by the farmer to grow wheat

Goods and Services • Goods • Products • Use of wife’s labor to gather firewood • Differentiation • Utilities1 • Utilities2 • Use of water for growing padi • Resources • Three Types • Capital • Use of cattle dung to produce biogas • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 12 Examples of Opportunity Cost

Basic Economic Problem • Use of land owned by the farmer to grow wheat

Goods and Services • Goods • Products • Use of wife’s labor to gather firewood • Differentiation • Utilities1 • Utilities2 • Use of water for growing padi • Resources • Three Types • Capital • Use of cattle dung to produce biogas • OC • ExampleOC • ResourceCost • • Rival Time spend playing cards • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 12 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Diesel used to transport gravel to a construction site • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Diesel used to transport gravel to a construction site • Capital • OC • • ExampleOC Labor hired to clean up a landfill • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Diesel used to transport gravel to a construction site • Capital • OC • • ExampleOC Labor hired to clean up a landfill • ResourceCost • Rival • Use of water for growing padi • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Diesel used to transport gravel to a construction site • Capital • OC • • ExampleOC Labor hired to clean up a landfill • ResourceCost • Rival • Use of water for growing padi • NonRival • Excludable • Nonexcludable • Corn grown and then fed to cattle on the same farm • Public • Categories • Categories I • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Diesel used to transport gravel to a construction site • Capital • OC • • ExampleOC Labor hired to clean up a landfill • ResourceCost • Rival • Use of water for growing padi • NonRival • Excludable • Nonexcludable • Corn grown and then fed to cattle on the same farm • Public • Categories • • Categories I Land used for a public park • Common

Goods – 13 Cost of Resources

Basic Economic We frequently measure of the value a particular resource by its Problem

Goods and Services opportunity cost • Goods • Products Consider how we might measure the value or cost of the following • Differentiation items. • Utilities1 • Utilities2 • Resources • Three Types • Diesel used to transport gravel to a construction site • Capital • OC • • ExampleOC Labor hired to clean up a landfill • ResourceCost • Rival • Use of water for growing padi • NonRival • Excludable • Nonexcludable • Corn grown and then fed to cattle on the same farm • Public • Categories • • Categories I Land used for a public park • Common • Goodwill generated by a particular brand

Goods – 13 Rival Goods

Basic Economic Rival goods are goods whose consumption by one consumer Problem

Goods and Services prevents simultaneous consumption by other consumers. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 14 Rival Goods

Basic Economic Rival goods are goods whose consumption by one consumer Problem

Goods and Services prevents simultaneous consumption by other consumers. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 14 Rival Goods

Basic Economic Rival goods are goods whose consumption by one consumer Problem

Goods and Services prevents simultaneous consumption by other consumers. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 14 Rival Goods

Basic Economic Rival goods are goods whose consumption by one consumer Problem

Goods and Services prevents simultaneous consumption by other consumers. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public Both expendable and capital goods can be rival goods. • Categories • Categories I • Common

Goods – 14 Nonrival Goods

Basic Economic Nonrival goods may be consumed by one consumer without Problem

Goods and Services preventing simultaneous consumption by others. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 15 Nonrival Goods

Basic Economic Nonrival goods may be consumed by one consumer without Problem

Goods and Services preventing simultaneous consumption by others. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 15 Nonrival Goods

Basic Economic Nonrival goods may be consumed by one consumer without Problem

Goods and Services preventing simultaneous consumption by others. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 15 Nonrival Goods

Basic Economic Nonrival goods may be consumed by one consumer without Problem

Goods and Services preventing simultaneous consumption by others. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I Most nonrival goods are intangible. • Common

Goods – 15 Excludable Goods

Basic Economic With excludable goods or services, it is possible to prevent people Problem

Goods and Services who have not paid for them from enjoying the benefits. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 16 Excludable Goods

Basic Economic With excludable goods or services, it is possible to prevent people Problem

Goods and Services who have not paid for them from enjoying the benefits. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 16 Excludable Goods

Basic Economic With excludable goods or services, it is possible to prevent people Problem

Goods and Services who have not paid for them from enjoying the benefits. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I Other examples of excludable goods include movie theatres, bridges • Common (with gates), large parks with fences, and private lakes.

Goods – 16 Nonexcludable Goods

Basic Economic With nonexcludable goods or services, it is impossible or extremely Problem

Goods and Services costly to exclude nonpayers from consumption. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 17 Nonexcludable Goods

Basic Economic With nonexcludable goods or services, it is impossible or extremely Problem

Goods and Services costly to exclude nonpayers from consumption. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 17 Nonexcludable Goods

Basic Economic With nonexcludable goods or services, it is impossible or extremely Problem

Goods and Services costly to exclude nonpayers from consumption. • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I Other examples of nonexcludable goods include the ocean, air, an • Common underground aquifer, large parks without fences, and mosquito spraying operations.

Goods – 17 Public Goods

Basic Economic Public or collective goods are goods that all individuals want, but for Problem

Goods and Services whose production it is often not individually rational for people • Goods voluntarily to do their part to secure a collectively rational outcome. • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 18 Public Goods

Basic Economic Public or collective goods are goods that all individuals want, but for Problem

Goods and Services whose production it is often not individually rational for people • Goods voluntarily to do their part to secure a collectively rational outcome. • Products • Differentiation • Utilities1 An example might be a neighborhood park that is open to all. • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 18 Public Goods

Basic Economic Public or collective goods are goods that all individuals want, but for Problem

Goods and Services whose production it is often not individually rational for people • Goods voluntarily to do their part to secure a collectively rational outcome. • Products • Differentiation • Utilities1 An example might be a neighborhood park that is open to all. • Utilities2 • Resources • Three Types If there is no way to charge admission for use of the park, many • Capital • OC people may want to “free-ride”. • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 18 Categories of Goods

Excludable Non-excludable Rivalrous Private goods Common-pool resources Food, clothing, trucks, tools, Water, fish, game (hunting), petroleum Non-rivalrous Club goods Pure public goods Satellite television, homeowners’ National defense, air, free-to-air association television

Goods – 19 Categories of Goods (Test)

Excludable Non-excludable Rivalrous

Non-rivalrous

Goods – 20 Common-Pool Resources

Basic Economic Problem

Goods and Services • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21 Common-Pool Resources

Basic Economic Problem • Characteristics of common pool resources

Goods and Services • Goods • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21 Common-Pool Resources

Basic Economic Problem • Characteristics of common pool resources

Goods and Services • Goods ◦ Rival • Products • Differentiation • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21 Common-Pool Resources

Basic Economic Problem • Characteristics of common pool resources

Goods and Services • Goods ◦ Rival • Products • Differentiation ◦ Non-excludable • Utilities1 • Utilities2 • Resources • Three Types • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21 Common-Pool Resources

Basic Economic Problem • Characteristics of common pool resources

Goods and Services • Goods ◦ Rival • Products • Differentiation ◦ Non-excludable • Utilities1 • Utilities2 • Resources • Three Types Or exclusion costs are very high • Capital • OC • ExampleOC • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21 Common-Pool Resources

Basic Economic Problem • Characteristics of common pool resources

Goods and Services • Goods ◦ Rival • Products • Differentiation ◦ Non-excludable • Utilities1 • Utilities2 • Resources • When no one owns a resource, users have no incentive to • Three Types • Capital conserve for the future, or to consider the foregone benefits to • OC • ExampleOC others • ResourceCost • Rival • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21 Common-Pool Resources

Basic Economic Problem • Characteristics of common pool resources

Goods and Services • Goods ◦ Rival • Products • Differentiation ◦ Non-excludable • Utilities1 • Utilities2 • Resources • When no one owns a resource, users have no incentive to • Three Types • Capital conserve for the future, or to consider the foregone benefits to • OC • ExampleOC others • ResourceCost • Rival • Examples • NonRival • Excludable • Nonexcludable • Public • Categories • Categories I • Common

Goods – 21