Unit 2.8-2.10: Market failure review sheet

Introduction

This table which when completed can be used as a revision aid, for the types of goods unit.

	Private goods	Free goods	Public goods	Merit goods	De-merit goods	Negative externalities	Positive externalities
Definition	A good which is can be sold	A good with no opportunity cost when consumed	A good which is non excludable and non-rivalrous	A good with positive externalities when consumed	A good with negative externalities when consumed	A negative spillover cost imposed by a third party when a transaction is made	A benefit enjoyed by a third-party as a result of an economic transaction
Provided by	Private businesses	-	Governments	Governments and private businesses	Private businesses	Demerit goods when consumed	Merit goods when consumed
External costs / benefits	Both	Neither	Benefits	Benefits	Costs	Costs	Benefits
Information failure	No	No	Yes	Yes	Yes	N/A	N/A
Government actions	None required	None required	Must provide	Provide to reduce market failure	Tax, restrict or ban	Legislate to correct	Legislate to maximise
Examples	Numerous	Fresh air	Police or the military	Schools, hospitals	Cigarettes, alcohol	Pollution, passive smoking	Healthier, more productive workforce
Non-rivalrous	No	Yes	Yes	No	No	N/A	N/A
Non-excludable	No	Yes	Yes	No	No	N/A	N/A
MC=0	No	Yes	Yes	No	No	N/A	N/A

The table ıs available as a PDF file at: Types of good