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What are Public Goods and Private Goods - Teachoo.JPG

Difference between Public Goods and Private Goods - Teachoo.JPG

What are Private Goods?

Any goods which are meant for consumption

of a particular individual or group of individual

and

other person are restricted from using it

Example

Suppose a person purchase a car

Only that person has right to use that car

Any other person can't use the car without his permission

Hence, car is a Private good

Note-

All products purchased households and business are private goods

Example - Clothes, Vehicles, TV, Mobile etc

What are Public Goods?

Public goods are goods which are available for consumption to all members of society

All people are free to use it

Example

Roads, Bridges etc

In this case, all members of public are free to use these roads and bridges

So it is a Public Good.

Important Points of Public Goods

They are Non Rivalrous

One person can increase his satisfaction from goods without reducing satisfaction of other person from the same goods

Example- Any person can use the road any number of time, it does not affect other person's use of road

 

They are Non Excludable

No person can be excluded (stopped) from using the goods

Example- A road prepared by govt can be used by anyone

 

Generally Provided by Govt

Since these goods are non rivalrous and non excludable (free to use for anyone), it is difficult to collect fees for same

Hence, it is not profitable to make these goods for Private enterprises

So these goods are generally provided by Govt in budget

 

Difference between Private Goods and Public Goods

Private Goods Public Goods
Private Goods refers to any goods which are meant for consumption of a particular individual or group of individual and other person are restricted from using it. Public goods are goods which are available for consumtion to all members of society
They are Rivalrous in Nature (Provides satisfaction to only one person and restricts satisfaction to other persons) They are Non-Rivalrous in Nature. One person can increase his satisfaction from goods without reducing satisfaction of other person from the goods.
They are Excludable (Other persons are restricted from using the goods) They are Non Excludable No person can be excludes (stopped) from using the goods
They are Generally provided hy Private Sector as it is profitable to them to sell it and collect fees They are Generally not provided hy Private Sector So they are provided by govt in budget (Public Provision is made for the same)

What is Meaning of Public Provision?

Public Provision means provisions for goods and services which are financed by Govt Budget and they are free to use by any person

In easy language, It means those goods and services which are provided free of cost to everyone by the govt.

Example

Public Goods like Bridges, Dams etc are provided free of cost by Govt by making a provision for them in budget

Note

Goods may be produced by public sector or private sector

Money is paid by govt for the same

What is Public Provision - Teachoo.JPG

Difference between Public Provision and Public Production

Public Provision Public production
All expenses are paid by govt All goods and service are produced by govt
These may be produced by anyone (Private sector or Public Sector) They are produced by Public Sector (Govt)

Difference between Public Provision and Public Production - Teachoo.JPG

NCERT Questions

Question 1

Explain why public goods must be provided by the government.

View Answer

Other Books

Question 1

In the following questions, select the correct answers:

Which of these is not a point of difference between public and private goods?

  1. Public goods are non-profitable, while private goods are profitable
  2. Private goods are produced by private companies and public goods are produced by government
  3. Public goods are in infinite quantity, private goods are in limited quantity
  4. Private goods are excludable, Public goods are non-excludable
View Answer

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Transcript

What are Public Goods and Private Goods Private Goods Public Goods They are goods which are meant for Consumption (use) of Particular person Example- Car They are goods which are Meant for Consumption (use) of all members of society Example -Bridge Difference between Public Goods and Private Goods Private Goods Public Goods PROPERTIES RIVALROUS (Provides satisfaction to only one person) EXCLUDABLE (Person can exclude someone from sitting in their car) GENERALLY, PROVIDED BY PRIVATE SECTOR (Made by Private car Company) NON RIVALROUS (Provides satisfaction to all) NON- EXCLUDABLE (Any person can use the Public bridge) GENERALLY PROVIDED BY GOVERNMENT (Public Provision made by Govt) What is Public Provision PUBLIC PROVISION Government Provided by Goods and Services which are provided by government free of cost in Government Budget Who Provides these Goods? These are provided by Government Who Produces these Goods? May be Produced by Public Sector (Govt) or Private Sector Note Public Provision and Public Production are Different Difference between Public Provision and Public Production PUBLIC PROVISION PUBLIC PRODUCTION Govt. Provided Govt. Produced Goods and Services which are Provided by Government Free of cost In Govt. Budget Goods and Services are Produced by Govt. May be Produced By Public Sector Or Private Sector Produced by Public Sector Only (Not Pvt. Sector) Note Public Provision is made for Public Goods. However they be produced by anyone-Public or Private

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CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.