Public Good

AAA

DEFINITION of 'Public Good'

A product that one individual can consume without reducing its availability to another individual and from which no one is excluded. Economists refer to public goods as "non-rivalrous" and "non-excludable". National defense, sewer systems, public parks and basic television and radio broadcasts could all be considered public goods.

INVESTOPEDIA EXPLAINS 'Public Good'

One problem with public goods is the free-rider problem. This problem says that a rational person will not contribute to the provision of a public good because he does not need to contribute in order to benefit.





For example, if Sam doesn't pay his taxes, he still benefits from the government's provision of national defense by free riding on the tax payments of his fellow citizens.



RELATED TERMS
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s ...
  2. Public-Private Partnerships

    A business relationship between a private-sector company and ...
  3. Private Good

    A product that must be purchased in order to be consumed, and ...
  4. Free Lunch

    A situation in which a good or service is received at no cost, ...
  5. Tragedy Of The Commons

    An economic problem in which every individual tries to reap the ...
  6. Diner's Dilemma

    A game-theory situation with several players. Similar to a prisoner's ...
RELATED FAQS
  1. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

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

    The Austrian School Of Economics

    Investopedia explains: If you think economists are only concerned with numbers, check out the Austrian School, who are more like economic philosophers.
  3. Economics

    The Uncertainty Of Economics: Exploring The Dismal Science

    Learning about the study of economics can help you understand why you face contradictions in the market.
  4. Economics

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
  5. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  6. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?
  7. Economics

    Understanding Impairment

    In finance and accounting, impairment refers to the loss of value of a company’s capital stock.
  8. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  9. Economics

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
  10. Savings

    How Microeconomics Affects Everyday Life

    Microeconomics is the study of how individuals and businesses make decisions to maximize satisfaction. Microeconomic principles can describe many everyday experiences. We use renting a New York ...

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center