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Public Goods: Demand Curve and Optimal Quantity definitions

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  • Private Good
    An item that is both rival and excludable, meaning consumption by one reduces availability for others and access can be restricted.
  • Public Good
    A resource that is non-rival and non-excludable, allowing simultaneous use by all without preventing access.
  • Market Demand
    The total quantity desired by all individuals at each price, found by summing individual quantities for private goods.
  • Horizontal Addition
    A method for private goods where individual quantities demanded are summed at each price to form the market demand curve.
  • Vertical Addition
    A process for public goods where individual prices each person is willing to pay are summed at each quantity.
  • Non-Rivalry
    A property where one person's use does not diminish the availability for others, as seen with public goods.
  • Non-Excludability
    A characteristic where it is impossible or impractical to prevent anyone from benefiting from the good.
  • Marginal Social Benefit
    The total value to society from one more unit, calculated by summing individual willingness to pay for a public good.
  • Marginal Social Cost
    The total cost to society of producing one more unit, typically represented by the supply curve in absence of externalities.
  • Supply Curve
    A graphical representation showing the cost of providing each additional unit, used as marginal social cost for public goods.
  • Optimal Quantity
    The amount where marginal social benefit equals marginal social cost, indicating the most efficient provision of a public good.
  • Individual Demand
    The quantity of a good a single consumer is willing to purchase at various prices.
  • Externality
    A side effect or consequence that affects others not directly involved, requiring adjustments to cost or benefit calculations.