ECONOMY PUBLIC

REPORT
PUBLIC GOODS AND PRIVATE GOODS
By : Ria Amalia/021100032

2012

1|PBL REPORT TASK 1 -PUBLIC AND PRIVATE GOODS

TRISAKTI UNIVERSITY

PBL REPORT
1) Type of task 2) Difficult word Excludable Rivalry : Study task : : Pay for get the goods. : When we consume one goods it will be reduce the consumption of other people. Quasy public goods : No rivalry and excludable (have to pay). Ex: public transportation, electricity, PAM (Water public consumption) Free rider : Someone take the benefit or advantage of public goods without Contribute anything or not paid. Demerit goods : Government allow the goods but not recommend to consume it and any policy form the government. Ex: sex education, smoking area, rehabilitazion, feeding room (for baby), museum, mosque, church, and etc. Merit goods : Government allow the goods and support to consume it. Ex: adult magazine, cigarattes, porn food, and etc. 3) Main problems 4) Learning objectives : : Public goods and private goods facilities (dvd or cinema), junk

Definition of Public and Private goods Characteristic of Public and Private goods Give example of Public and Private goods Pricing decision of Public and Private goods Implementation of Public and Private goods Impact from Public and Private goods to many sector Recommendation from the impact 5) Method 6) Result : : 5W + 1H

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a) Definition of Public and Private goods 1. Definition of Public goods

In economy view, the goods can be classified according to the criteria of usage or consumption and ownership rights. Public goods in general can be defined as goods which if in production, the producers do not have the ability to control who deserve it. This means that it is impossible to prevent a person not to consume public goods.

2. Definition of Private goods

Private goods are goods that have the opposite characteristics of public goods. Private goods are goods that are typically acquired through the market mechanism, where the meeting point between producers and consumers is the price mechanism. Therefore, the ownership of private goods can usually be identified with either. Most of the goods we consume are private goods, that is goods that can only be used by one customer at a time. For example, when someone is eating his cake, others can not do the same and when we have a personal car that others can not use our car.

b) Characteristic of Public and Private goods 1) Characteristics of Public goods

Two characteristics in classifying an item becomes a public good: Non-rivalry (there is no rivalry in consumption) The consumption of the goods by an individual does not reduce the amount of goods available for consumption by other individuals. Non-excludability (can not be excluded). That all people are entitled to enjoy the benefits of the goods. Public goods are not consumed in the terms used up, but the goods can be enjoyed.

2) Characteristics of Private goods

The main characteristics of private goods is the opposite of public goods, there are the characteristics of private goods:

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1. Rivalry consumption where the consumption by one consumer will reduce or eliminate the opportunity of another to do the same. that occur rivalry between the consumer in consuming these goods. 2. Excludable consumption where the consumption of goods can be limited only to those who meet certain requirements (usually the price), and those who do not pay or do not qualify can be excluded from access to get these goods (excludable). For example, clothing stores may be owned only by those who buy or pay, while those who not pay can not have the clothes.

Private goods usually are held to find profit. Because of these characteristics to attract the private sector and create an understanding that private the goods are goods produced by the private sector.

c) Example of Public and Private goods

Excludable Non-Excludable

Rivalry

Private Goods Ex: food, clothing, cars, personal electronics, and etc.

Non-Rivalry

Public Goods Ex: Air, roads, a city park, traffic light,national defense, and etc.

d) Pricing decision of Public and Private goods I. Pricing decision of Public goods
The Providing public goods is not an happened market mechanism. In public goods which if in production, the producers do not have the ability to control who deserve it.

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II.

Pricing decision of Private goods

Opposite with public goods, the price decision of an private goods is based on market mechanisms. The market mechanism based on the exchange and exchange only occurs if there is an exclusive right for the someone who bought it.

e) Implementation of Public and Private goods I. Implementation of Public goods

One person will not be able to exclusively use the public good, because if the person is consumed, at the same time one or others can consume the public good together. Consumers are also not willing to pay for public goods,with consideration that other people also enjoy the same goods. The benefits are felt by one people will be equal to felt benefit of others, so that the payment only by a consumer is not significant. The relationship between producers and consumers are becoming non-existent and thus the task of government must be willing to produce public goods.

I.

Implementation of Private goods

In a market system; Producers will produce the goods if the Customer requires that goods Only those who are willing to pay for goods that can get benefit of goods.

f) Impact from Public and Private goods to many sector Impact from Public goods
Free rider problem Some people voluntarily contribute to the provision of public goods, But on the other hand, there are few people which do not want to contribute voluntarily called free riders (those which take advantage of public goods without contributing anything). Excessive use of public goods that cause less consumption of other people (consumption activities of one people affect the utility of other people). for example: road traffic due to the protests 5|PBL REPORT TASK 1 -PUBLIC AND PRIVATE GOODS

Externality, Consumption of public goods often lead that called externalities or external effects. Generally, the externality is defined as the impact (positive or negative), or in economic activity is called net benefit or cost, of the actions one side to another people. for example: smoking which causes air to be not clean, we have to breathe cigarette smoke from other people who smoke

Impact from Private goods

If all the links between an activity with other activities implemented through market mechanisms or through a system, the linkages between these activities do not cause problems. Because private goods does not reduce the consumption of others people.

g) Recommendation from the impact

There are some solution to reduce the impact from public goods; Some person voluntarily contribute to the provision of public goods, because Problems will emerged if the number of free riders increases Because finally all group members are unable to enjoy the convenience of public goods. government provisions The Government should establish provisions to protect public goods, this is because public goods are goods that are free in use by everyone, anytime and any amounts (non-rivalry and non-excludable). For example: the government set requirement that every car must be in accordance with a catalytic converter it is useful to protect public goods such as air to keep clean. Government should set taxes to eliminate the externality, and taxes are also used to improve public facilities and increase public facilities. public awareness Examples; City park, every person who visited the park to keep it clean, like take out the trash in its place, does not damage the park facilities.

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