Econ 1101 1st Edition Lecture 20 Outline of Last Lecture 1 Trade Policy 2 China and US Trade 3 MobLab Experiment Outline of Current Lecture 4 Public Goods 5 Consumer Theory 6 Preferences a Perfect Substitutes b Perfect Compliments c Decreasing Marginal Rate of Substitution Current Lecture Public Goods Private Rivalrous If I eat it you can t Excludable people can be excluded from using it Public Nonrivalrous one s usage doesn t take away anyone else s usage Nonexcludable can t prevent anyone from using Example tornado sirens street lamp national defense research with no patent With a private good you make unit of output and give to person if marginal willingness to pay exceeds the marginal cost With a public it s the same benefit with different marginal willingness except people can pay different and receive the same benefits Taxes Who pays for road construction Add the willingness to pay of each other In PowerPoint example it is socially efficient to build artificial sun These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute In a free market free loader problem no one wants to put in the money themselves Note with technology change things can become excludable that before were not and vice versa In the real world you might not see the benefits is it still a public good An entrepreneur makes a sun and sells sunglasses D1 D5 buy glasses 25 revenue with 20 investment It is now an excludable good Common Resources Nonexcludable Rivalrous Example world fishing stocks Tragedy of the commons Should we make fishing excludable Fish farming Consumer Theory How is demand found in the first place What determines your demand for an item How did you determine your value of that item Spam juice and spam curds similar to coconuts and fish Consider change in graph when Price of juice changes Price of curds changes Income changes Budget Constraint Like the coconut fish graph Slope opportunity cost of 1 more fish Price change
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