or overconsumption of that good. Since
the individual does not
have to pay for the good, he will demand it until the point where the
marginal benefit he receives from the good is zero,
in spite of the
fact that there is a positive marginal cost associated with providing
it. In some cases such as water, satiation may be quickly reached,
so that the distortion form overconsumption may not be too large as
it is shown in Figure 14.3 (A). In other cases , such as the demand
for certain types of medical services,
the distortion may be very
large as it is shown in Figure 14.3 (B). The welfare loss can be
measured by the difference between what the individual is willing to
pay for the increase in output from Qe (where price equals marginal
cost) to Qm (where price equals zero)
and the costs of increasing
production from Qe to Qm. This is the area shaded triangles in
Figure 14.3.
14.3.6 Rationing Devices for Publicly Provided Private Goods:
When there is marginal cost associated with each individual
using a good, if the cost of running the price system is very high, it
may be more efficient simply to provide
the good publicly and to
finance the good through general taxation,
even though providing
the good publicly causes a distortion.
Transaction cost- This is the cost associated with exclusion for
private goods as well as for public goods, e.g. salaries of checkout
clerks for grocery
and collectors of tolls, which is part of the
administrative cost associated
with the operating a price
mechanism.
Figure 14.4: Transactions Costs
Do'stlaringiz bilan baham: 
