The Taylor Teletransporter is new technology that will transport people instanta

Question

The Taylor Teletransporter is new technology that will transport people instantaneously between any two places on earth. This invention will provide considerable spillover benefits to society. The table below shows the demand for the transporters, the supply of transporters if Taylor receives only the private benefits, and the supply of transporters if Taylor also receives the full social benefits. Identify the equilibrium quantity and price if Thylor Transporters were sold based only on private benefits. Identify the equilibrium price if the brilliant inventor Taylor was to receive the social benefits too. A clever economics student writes up a wonderful set of notes that can help everyone studying economics to earn a higher grade. The student posts these notes on a website. Are these notes a public good? Using the two key traits of a public good, explain your answer. In the city of Crimetown, many businesses and neighborhoods are hiring private firms to install locks and gates and to provide security guards. However, during the last city election, a majority of people in the city voted against expanding the city's police force. Use the concept of the free rider problem to explain why the same people might hire security guards for their own homes and businesses but vote against expanding the city police force.

Explanation / Answer

b) Public goods are those goods whose consumption by one person does not reduce its availability to others. For example: air, street lights, public water supplies, flood control system ,national security, defense system ,for civilians, and many more.

Characteristics of a public good:

a) Non-excludibility: These goods does not belong to one person who has paid for it. Even non-payers can enjoy the benefit of such goods at zero cost. Ex: Street hoardings are watched by a large number of people. Its use can not be limited to one person only restricting others to watch it. In the study of economics, it is called 'free rider problem' as it is impossible to exclude individuals from its usage.

b) Non-rival: These goods are non-rival in nature. It implies that the usage of these goods by one individual does not reduce its quantity for others to use or consume. It is available for all the people and not restricted solely to one person. Ex : Street lights or public fireworks display,

c) Non-rejectable: These goods can not be rejected by people for its usage, for example, fresh air to breathe, water to drink, civil defense system,

d) Free of cost: These are available to the individuals free of cost.

Now, in this scenario, a student has made wonderful set of notes of economics and displyed these notes on a website to help other students. These notes are considered as public goods, The students has made these notes. He is the owner of these notes. However, he has displayed to help other students so it is a benefit provided by him to other students. Posting these notes on a website implies that he wants others to consume it and have the advantage of consuming it. He has not restricted others to watch these notes on the website. Other students have not paid for these notes. Being non-payers, they can enjoy the benefit of its usage.

Usage of these notes by one student doe not reduce its quantity for others to use it. It is free of cost for all other students. His owner has not exercised private property rights over them.

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