1.1. Introduction to Public Goods, Common Resources, and Externalities

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Microeconomics Principles

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University of Illinois at Urbana-Champaign

Microeconomics Principles

716 notes

This course offers an introduction to the functions of individual decision-makers—both consumers and producers—within the larger economic system. Emphasis is on the nature and functions of product markets, the theory of the firm under varying conditions of competition and monopoly, and the role of government in promoting efficiency in the economy. Most people make the incorrect assumption that economics is ONLY the study of money. My primary goal in this course is to shatter this belief. During this course, we will be addressing the above questions as well as many more relating to: -the environment -love and marriage -crime -labor markets -education -politics -sports -business My main goal is to show you the way economists think and how to use this analytical system to answer questions related not only to these and other important human issues, but to anything you end up doing with your life after this class. After all, as you will quickly find out, I believe that everything is economics!

À partir de la leçon

Public Goods, Common Resources, and Externalities

And so we have arrived at the last week. This course has gone too fast! This module we will be discussing market failures. A market failure is a situation when the market does not do a good job of distributing resources among members of society. In fact, in all of these cases the market IS the problem.

1.1. Introduction to Public Goods, Common Resources, and Externalities3:56

Rencontrer les enseignants

Dr. José J. Vázquez-Cognet
Clinical Professor
Department of Economics

[SOUND]

So welcome to your eight week of microeconomics course.

And you're wondering why we are whispering here and that's because we're coming to

you from one of the main libraries at the University of Illinois, and we're trying

to be quiet here because we're in an area of the library called the Library Commons.

This is where all students come, and can study individually or can study in groups.

And this is the perfect place to start the discussion for

this week because this week we're going to talk about,

one of the topics we talk about this week, is exactly that.

The [INAUDIBLE] the commons.

How do people use this particular space?

How do students make sure that this space,

that all of them use at the same time, is actually used in the most effective way?

Clearly when you are in the middle of the day like today.

And you come here to study on your own, you probably don't have many issues.

There's not many students here and you can probably find a quiet space to study,

regardless of where you are in the library.

So even in the commons, you can probably come here and

study quietly and study all your things.

But if you come here and at night, seven or

eight o'clock at night, there's hundreds of students here.

Trying to use the commons and all of them using them in different ways.

So clearly there are more students coming to this area, the less

quiet it will be for those students who want to study quietly in the library.

So there's clearly a conflict between the number of students who want to

study in the library and also the fact that they all have access to it.

So that's one of the topics we're going to talk about this week.

How do society manages resources?

That are, in essence, kind of like the commons here in the library.

Those are resources that everyone has access to.

But then the more people use it, the more difficult it is to manage the resource.

Classic example that we'll talk about this week is the fish.

Fish in the water, or

resources in general, clean air, clean water, and so forth.

So this week, we'll essentially going to talk about those resources and kind of

bring the idea that sometimes, when we deal with those type of resources,

the markets have actually a lot of trouble distributing those resources on their own.

Free markets, in fact, don't do a good job in distributing those resources.

And there's a perfect justification for the government to intervene in markets and

try to improve the distribution scheme that market provides.

This is a week in which we talk about, for the first seven weeks in the course,

we talk about situations in which free markets, in fact, increase the benefits or

the social welfare.

This week we focus on those instances, on those types of resources in

which the market on it's own is going to not increase the social welfare.

And there's justification for

the government to actually intervene to market, to make it better.

So let's go over the week, first talk about the different type of goods,

including common resources like the library here, public goods.

And then the second part of the week we talk about externalities.

And then we come back here to see if we can close the course by answering

the question, how does a library manage the commons?

How do they make sure that this public resource

is used in the most effective way?

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