Chapter 11

The main topic of this chapter was the various ways that goods and markets are classified. There are two main tools used, whether a using a good diminishes the next person's use of the good, or rival in consumption, or whether someone can be kept from using the good. All private markets that economists normally analyze are positive for both of these characteristics. Public goods, in the book a tornado siren was given, are neither of these. Everyone can hear the siren and everyone also gets the same benefit from the siren. Common goods such as fish and animals cannot be restricted in use but their use diminishes the use by others. Then there are goods whose use doesn't get diminished when others use them but they are often restricted. The main problem comes with common goods and public goods. For one, they are both free so there is no incentive to create a supply. It may also be difficult to charge people for the service, such as fireworks, even though people would generally be okay with paying a small fee. This is when the government steps in and does its job. It may place a restriction like a fishing restriction or a pollution restriction, in the case of the public good clean air, or a tax on everyone to generate revenue to be spent on things like fireworks. The government has to be careful with the specifics of the policy but these free markets are naturally considered market failures in need of assistance.