Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

Properties of Public Goods 
a. Non- Rival-
refers to cases from which one person‘s 
consumption does not detract from or prevent another 
person‘s consumption. 
b. Non-excludability 
– refers to case from which it is impossible 
to leave out other people from consuming the goods or 
services and impossible to impose price system. 
Two Basic Forms of Market Failures 
a. Underconsumption- Charging a price for non-rival goods 
prevents some people from enjoying the good, even though 
their consumption of the good would have no marginal cost, 
thus resulting to inefficiency due to underconsumption. 
b. Undersupply- If there is no charge for non-rival goods, there 
will be no incentive for supplying the good, and In this case 
inefficiency takes the form of undersupply.

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Paying for Public Goods 
User Fees -If exclusion is possible, even if consumption is 
non-rival, government often charges fees in these form, to those 
who benefit from a publicly provided good or services, e.g. Tool 
fess, airline ticket tax. 
14.3.2 Free Rider Problem 
 
Free Rider Problem 
The reluctance of the individuals to contribute voluntarily to 
the support of public goods because every individual would believe 
that he would benefit from the services provided regardless of 
whether he contributed to the service, he would have no incentive 
to pay for the services voluntarily. That‘s why the government has 
to compel people to pay taxes to finance these public goods. 
Public goods are characterized by non-rival consumption 
and non-excludability. With non-rival consumption, it is not feasible 
to exclude anyone from enjoying the benefits. If they are provided 
by the private sector, there will be under consumption and/or under 
supply.