Question

What are the two characteristics that differentiate private goods from public goods?

Answer 1

The two characteristics that differentiate private goods from public goods are excludability and rivalry.

Excludability

• Private goods: These are excludable, meaning it is possible to prevent people from consuming them if they do not pay. A seller can enforce a price, and those who don’t pay are excluded from the good’s benefits. For example, you are excluded from seeing a movie if you don’t buy a ticket.
• Public goods: These are non-excludable, meaning it is not possible or economically feasible to prevent someone from enjoying the good once it is provided. For example, a country’s national defense system protects all citizens, including those who don’t pay taxes. 

Rivalry

• Private goods: These are rivalrous, meaning that one person’s consumption of the good prevents another person from consuming it. If you eat a sandwich, that specific sandwich is no longer available for someone else to eat.
• Public goods: These are non-rivalrous, meaning one person’s consumption does not reduce the good’s availability for others. Many people can enjoy a public park or the light from a streetlamp at the same time without diminishing its benefits for anyone else.