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22 June, 16:31

Consider the following scenarios. Use what you have learned to decide if the goods and services being provided are individual, public, or merit goods. For each case, state what kind of good has been described and explain your answer using the definitions of individual, public, and merit goods.

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  1. 22 June, 18:15
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    Individual (Private) Goods : Excludable, Rival

    Public Goods : Non Excludable, Non Rival

    Merit Goods : Positive externality goods, underproduced.

    Explanation:

    Goods are individual (private) / merit / public; on the basis of rivalry & excludability.

    Excludable goods are the goods that can be feasibly excluded from being consumed by non payers. Non excludable goods can't be feasibly prevented to be used by non payers.

    Rival goods are the goods whose consumption by a consumer reduces their availability for other consumers. Non rival goods' consumption by a consumer doesn't reduce their availability for other consumers.

    Individual (Private) goods are both - excludable & rival. Eg : Food, Clothes etc

    Public Goods are both - non excludable & non rival. Eg : Air, Street Light

    Merit goods are positive externality i. e positive side effect goods. They have extra unevaluated social benefit, which under evaluates their total benefit. As per market private benefit = private cost equilibrium condition : their under evaluated benefit curve leads to - equilibrium below optimal socially desirable production quantity. Eg Education
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