Private vs. Public Goods
Private goods:
• One person buys and consumes a product and it is not available
for purchase by another person
• Only one person who is willing and able to pay the market price
for the product obtains its benefits.
Public goods:
• Everyone can simultaneously obtain the benefits from a public
good
• One person’s benefit does not reduce the benefit to others;
there is no effective way of excluding individuals from the
benefits
Private Goods
Public Goods
Both
Put the following in the right place in the organizer above:
Amusement Park
College Education
Elementary and Secondary Schools
Police
Courts
Street Lights
Golf Course
Rock Concert
Public Television
Haircut
City Ice Rink
Restaurant
Externalities
Watch the video clip from the “Economic Lowdown” video series produced by the Federal Reserve Bank of St. Louis and provide the information
necessary to complete the organizer below:
Spillovers =
Spillovers/Externalities occur when:
Provide ALL the information about Negative Externalities here:
Provide ALL the information about Positive Externalities here:
How does the government correct for negative externalities:
How does the government encourage positive externalities:
Externalities
With a partner, complete the following organizer:
1. Identify a Negative Externality:
1. Identify a Positive Externality:
2. Show how each of these government actions would correct this
negative externality:
2. Show how each of these government actions would encourage
this positive externality:
a. Law or Regulation
a. Law or Regulation
b. Tax
b. Subsidy
Use your cellphone to define these terms:
Cap and trade =
Tragedy of the commons =
Government failures =
What Does the Government Do to Promote Economic Well-Being?
The government is involved in the following programs to promote economic well-being:
1) Promoting economic stability
a. Creating a widely accepted currency that maintains its value
b. Stimulating business activity
i. Tax incentives
ii. Tax rebates
c. Economic stimulus
i. Tax cuts
ii. Tax rebates
iii. Increased spending
2) Income distribution and anti-poverty measures
a. Progressive tax system
i. Wealthier citizens pay more of a percentage of their income, in theory
b. Welfare programs
i. Aid to people and families below the poverty rate
1. Food stamps
2. Public housing
3. School lunches
4. Medicaid
c. Unemployment insurance
Class Discussion Question:
What do you think are the unintended consequences of anti-poverty policies such as economic stimulus, a progressive tax system, welfare
programs, and unemployment insurance? What are the pros and cons of anti-poverty policies such as these? Be prepared to discuss and defend
your answers!