Private Good


DEFINITION of 'Private Good'

A product that must be purchased in order to be consumed, and whose consumption by one individual prevents another individual from consuming it. Economists refer to private goods as "rivalrous" and "excludable". If there is competition between individuals to obtain the good and if consuming the good prevents someone else from consuming it, a good is considered a private good.

BREAKING DOWN 'Private Good'

A private good is the opposite of a public good. Examples of private goods include food, airplane rides and cell phones.

Private goods are less likely to experience the free rider problem because a private good has to be purchased - it is not readily available for free. A company's goal in producing a private good is to make a profit. Without the incentive created by revenue, a company is unlikely to want to produce the good.

  1. Public-Private Partnerships

    A business relationship between a private-sector company and ...
  2. Public Good

    A product that one individual can consume without reducing its ...
  3. Tragedy Of The Commons

    An economic problem in which every individual tries to reap the ...
  4. Common Resource

    A resource, such as water or pasture, that provides users with ...
  5. Economics

    A social science that studies how individuals, governments, firms ...
  6. Free Rider Problem

    1. In economics, the free rider problem refers to a situation ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Economics

    Understanding Supply-Side Economics

    Does the amount of goods and services produced set the pace for economic growth? Here are the arguments.
  3. Personal Finance

    The History Of Capitalism: From Feudalism To Wall Street

    Find out how the economic system we now use was created.
  4. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  5. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  6. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  7. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  8. Fundamental Analysis

    Emerging Markets: Analyzing Chile's GDP

    Chile has become one of the great economic success stories of Latin America.
  9. Investing

    Watch Your Duration When Rates Rise

    While recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors.
  10. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  1. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  2. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  3. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  4. What bond indexes follow the supply and demand for junk bonds?

    Bond indexes that track junk bonds include the Merrill Lynch High Yield Master II Index and the S&P U.S. High Yield Corporate ... Read Full Answer >>
  5. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  6. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!