PBL REPORT Task 2-Public and Private Goods

7/29/2019 PBL REPORT Task 2-Public and Private Goods

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1 | P B L R E P O R T T A S K 1 - P U B L I C A N D P R I V A T E G O O D S

ECONOMYPUBLIC

2012

REPORT

PUBLIC GOODS AND PRIVATE GOODS

By : Ria Amalia/021100032

T R I S A K T I U N I V E R S I T Y


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PBL REPORT

1) Type of task : Study task2) Difficult word :

Excludable : Pay for get the goods. Rivalry : When we consume one goods it will be reduce the consumption of

other people.

Quasy public goods : No rivalry and excludable (have to pay).Ex: public transportation, electricity, PAM (Water public consumption)

Free rider : Someone take the benefit or advantage of public goods withoutContribute anything or not paid.

Demerit goods : Government allow the goods but not recommend to consume it andany policy form the government.

Ex: sex education, smoking area, rehabilitazion, feeding room (for

baby), museum, mosque, church, and etc.

Merit goods : Government allow the goods and support to consume it.Ex: adult magazine, cigarattes, porn facilities (dvd or cinema), junk

food, and etc.

3) Main problems : Public goods and private goods4) Learning objectives :

Definition of Public and Private goods Characteristic of Public and Private goods Give example of Public and Private goods Pricing decision of Public and Private goods Implementation of Public and Private goods Impact from Public and Private goods to many sector Recommendation from the impact

5) Method : 5W + 1H6) Result :


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a) Definition of Public and Private goods

1. Definition of Public goods

In economy view, the goods can be classified according to the criteria of usage

or consumption and ownership rights.

Public goods in general can be defined as goods which if in production, the

producers do not have the ability to control who deserve it. This means that it is

impossible to prevent a person not to consume public goods.

2. Definition of Private goods

Private goods are goods that have the opposite characteristics of public goods.

Private goods are goods that are typically acquired through the market mechanism,

where the meeting point between producers and consumers is the price mechanism.

Therefore, the ownership of private goods can usually be identified with either.

Most of the goods we consume are private goods, that is goods that can only be

used by one customer at a time. For example, when someone is eating his cake, others

can not do the same and when we have a personal car that others can not use our car.

b) Characteristic of Public and Private goods

1) Characteristics of Public goods

Two characteristics in classifying an item becomes a public good:

- Non-rivalry (there is no rivalry in consumption)The consumption of the goods by an individual does not reduce the amount of

goods available for consumption by other individuals.

- Non-excludability (can not be excluded).That all people are entitled to enjoy the benefits of the goods.

Public goods are not consumed in the terms used up, but the goods can be

enjoyed.

2) Characteristics of Private goods

The main characteristics of private goods is the opposite of public goods,

there are the characteristics of private goods:


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1. Rivalry consumptionwhere the consumption by one consumer will reduce or eliminate the

opportunity of another to do the same. that occur rivalry between the consumer in

consuming these goods.2. Excludable consumption

where the consumption of goods can be limited only to those who meet certain

requirements (usually the price), and those who do not pay or do not qualify can be

excluded from access to get these goods (excludable). For example, clothing stores

may be owned only by those who buy or pay, while those who not pay can not have

the clothes.

Private goods usually are held to find profit. Because of these characteristics

to attract the private sector and create an understanding that private the goods

are goods produced by the private sector.

c) Example of Public and Private goods

Excludable Non-Excludable

Rivalry

Non-Rivalry

d) Pricing decision of Public and Private goodsI. Pricing decision of Public goods

The Providing public goods is not an happened market mechanism. In public

goods which if in production, the producers do not have the ability to control who

deserve it.

Private Goods

Ex: food, clothing, cars,

personal electronics, and etc.

Public Goods

Ex: Air, roads, a city park, traffic

light,national defense, and etc.


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II. Pricing decision of Private goods

Opposite with public goods, the price decision of an private goods is based on

market mechanisms.

The market mechanism based on the exchange and exchange only occurs if there

is an exclusive right for the someone who bought it.

e) Implementation of Public and Private goods

I. Implementation of Public goods

One person will not be able to exclusively use the public good, because if the person isconsumed, at the same time one or others can consume the public good together.

Consumers are also not willing to pay for public goods,with consideration that otherpeople also enjoy the same goods.

The benefits are felt by one people will be equal to felt benefit of others, so that thepayment only by a consumer is not significant.

The relationship between producers and consumers are becoming non-existent andthus the task of government must be willing to produce public goods.

I. Implementation of Private goods

In a market system;

Producers will produce the goods if the Customer requires that goods Only those whoare willing to pay for goods that can get benefit of goods.

f) Impact from Public and Private goods to many sector

Impact from Public goods

- Free rider problemSome people voluntarily contribute to the provision of public goods, But on the

other hand, there are few people which do not want to contribute voluntarily

called free riders (those which take advantage of public goods without contributing

anything).

- Excessive use of public goods that cause less consumption of other people(consumption activities of one people affect the utility of other people). for

example: road traffic due to the protests


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- Externality, Consumption of public goods often lead that called externalities orexternal effects. Generally, the externality is defined as the impact (positive or

negative), or in economic activity is called net benefit or cost, of the actions one side

to another people. for example: smoking which causes air to be not clean, we have

to breathe cigarette smoke from other people who smoke

Impact from Private goods

If all the links between an activity with other activities implemented through

market mechanisms or through a system, the linkages between these activities do

not cause problems. Because private goods does not reduce the consumption of

others people.

g) Recommendation from the impact

There are some solution to reduce the impact from public goods;

Some person voluntarily contribute to the provision of public goods, because Problemswill emerged if the number of free riders increases Because finally all group members

are unable to enjoy the convenience of public goods.

government provisions-

The Government should establish provisions to protect public goods, this is becausepublic goods are goods that are free in use by everyone, anytime and any amounts

(non-rivalry and non-excludable). For example: the government set requirement

that every car must be in accordance with a catalytic converter it is useful to protect

public goods such as air to keep clean.

- Government should set taxes to eliminate the externality, and taxes are also used toimprove public facilities and increase public facilities.

public awarenessExamples; City park, every person who visited the park to keep it clean, like take out the

trash in its place, does not damage the park facilities.

PBL REPORT Task 2-Public and Private Goods

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