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Chapter 5: Q. 5.2 (page 100)

Distinguish between private goods and public goods and explain the nature of the free-rider problem.

Short Answer

Expert verified

Private are owned and public goods are for all.

Step by step solution

01

Step1. Given information

Free-rider problem exist in the case of public goods.

02

Step2. Explanation

Private goods are those whose ownership is defined and they are available for private consumption only. Eg. car owned by a man.

Public goods are those whose ownership is not defined and belongs to all public. It is available for consumption by all general public. Eg. a government bus.

Free-rider problem exist in the public goods as they are relatively very cheap and no one assumes the responsibility as the ownership is not linked. People tend to consume more and waste as they are practically close to free use.

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