Four Types of Goods and Two Characteristics - Online Tutor, Practice Problems & Exam Prep

Goods can be categorized based on two traits: rivalry in consumption and excludability. Private goods, like cheeseburgers, are both rival and excludable. Club goods, such as Netflix, are excludable but non-rival. Common resources, like fish in the ocean, are rival but non-excludable. Public goods, such as national defense and the court system, are both non-rival and non-excludable. Understanding these categories helps clarify economic interactions and resource management.

Two Characteristics:Rivalry in Consumption and Excludability

Hey guys, have you ever considered the difference between a cheeseburger and the US court system? Well, in this video, we're going to finally find the answer and distinguish between the two. Let's do that. Alright, so what we're going to do in this unit is we're going to start splitting up goods into different categories, okay? And we're going to do this split based on two traits. We're going to have the trait of rivalry in consumption and the trait of excludability, okay? So based on these two traits, we're going to break the goods up into four different categories.

Let's go ahead and start with the first trait, rivalry in consumption. Rival in consumption, right? That word rival, right? It's like an enemy, right? Someone else is your enemy in the consumption of this product, right? So the idea here is that only one person, right, there can only be one. It's kind of like the Highlander here. Only one person can consume each unit of the good, right? So when something's rival in consumption, one person can consume the good. So, what's an example of a rival good? Well, in this case, we're going to have that cheeseburger, right? A cheeseburger is a rival good, right? Because if I eat a cheeseburger, you can't eat that same cheeseburger, right? I'm the only one that gets to eat the cheeseburger, right? There's one person that can consume each unit of the good.

So you'd imagine the opposite of a rival good would be a nonrival good, okay? So this is going to be the opposite of a rival good. So, can you think of a nonrival good? A nonrival good would be something that, when I consume it, it doesn't make it that someone else can't consume that same unit, right? So this is a little trickier to think about, but a good example of a nonrival good is watching Netflix. So if you think about watching a movie on Netflix, right? If I were to go on Netflix and I watch my favorite movie Reservoir Dogs, I'd say that is probably my favorite movie. If I watch that on Netflix, it's not like me watching it made it so you can't watch it. Right? You can go ahead, and you can watch the same movie on Netflix and it doesn't affect my consumption, it doesn't affect your consumption, right? It's nonrival, we can both consume that same movie without detrimenting each other. Cool?

So, it's a nonrival good when we can all consume the same unit. So let's talk about the other trait, excludability. So when you think of exclude, right? We're going to exclude someone from something, it's when a person can be prevented from consuming it, right? The person can't use the good for some reason and that reason is pretty much always that they did not pay for the good, okay? So we can exclude people from using the good based on their payment, right? So if they didn't pay, they're going to be excluded.

So what's an example of an excludable good? Well, a good example to follow with that Netflix is still the idea of Netflix being excludable here. So Netflix can be an excludable good, right? Because Netflix charges you to watch the movies. If I wanted to watch Reservoir Dogs on Netflix, they would ask me for my sign-up, my password, right? They would need to make sure that I'm paying them money before they let me see the movie. So Netflix can exclude you from their goods, from the movies based on whether you paid or not, right? And I know a lot of you are sharing Netflix accounts. Bad on you, right? Pay Netflix their money. Just kidding. I do the same thing.

Example of a so if you guys excludable, what do you think the opposite here is gonna be? Wow. I can't believe you got that. Nonexcludable, right. So this is going to be the opposite of an excludable good is a nonexcludable good. Alright, can any of you think of an example of a nonexcludable good, right? This is a good that you can't keep people from using it, right? You can't keep them from using it even if they paid or did not pay, they're gonna be able to use it anyway. It's pretty tough, right? It's kinda tough to think of something that's nonexcludable, right? Oh, whoa, hey, that's a great example. I don't know who said that, but National Defense, I don't know where you came up with that, but that is actually a great example of a nonexcludable good, right? So if you think about it, if the government wants to protect, you know, your neighbors right, everyone around you from some kind of missile coming at you, they can't protect your neighbors but not you, right? They're gonna have to protect everybody, right? You can't exclude somebody from being defended from national defense. If you're inside the nation, you're gonna be defended. They can't say oh we're going to, protect everybody except you, you're not protected from this missile, right? They can't do it.

So national defense, that's a great example of a nonexcludable good. Cool, so we've seen the two traits here right? Rivalry in consumption and excludability. So we've got the traits and their opposites, alright? So now what we're going to do is we're going to take those traits and we're going to define four types of goods based on the different combinations of these traits. Alright, let's go ahead and do that in the next video.

The Four Types of Goods:Private Goods, Club Goods, Common Resources, and Public Goods

All right, so let's go ahead and define those four types of goods. On this table you'll see that I've split it up. We've got "excludable" and "non-excludable" along the top, and along the left-hand side "rival" and "non-rival", right? So, based on these combinations, we're going to get different types of goods. Let's start here in this top left corner, excludable and rival. When a good is excludable and rival, that means only one person can consume it and you could be made to pay for it. You can't consume it unless you paid, so these are our private goods, such as a cheeseburger. If there's a cheeseburger, and I eat it, you can't eat it. That's the rivalry, and generally, you're going to have to pay for the cheeseburger before you can eat it. This extends to all food and drink in general. Any kind of food or drink, if I eat it, you can't also eat it. So, they're going to be rival and excludable, because you can charge for this food. Moving on to household goods, a pair of jeans, if I'm wearing them, you can't wear them too. They're rival and they're excludable because you have to pay for the jeans. A house is another example of a private good, if I live in the house, I can exclude you because you didn't pay to live there. My family is living there, your family can't live there too. Cool, so those are our private goods.

Let's move on to club goods. These goods are excludable, so you can force people to pay before they can use the good, but they're non-rival. If I use a good, it doesn't keep you from using that same unit. Club goods, also known as quasi-public goods or artificially scarce goods, are typically subscription-based services like Netflix or access-controlled like toll roads or exclusive events like frat parties. For example, Netflix: to watch a movie doesn't stop anyone else from watching the same movie; it's non-rival but excludable because you need a subscription. Toll roads, when not congested, are similar; payment is required to use them, but one person's usage doesn't prevent another's. Frat parties work similarly -- only those in the frat (or guests) can attend, but one person attending doesn't diminish other's experience. These are artificially scarce because exclusivity is maintained through payment or membership.

Moving to common resources, these are non-excludable and rival. For example, fish in the ocean: no one can stop you from catching a fish, but once caught, it cannot be caught by another, hence it is rival. Clean air functions similarly; it's accessible by everyone, but pollution by one reduces quality for all, making it rival. The dating scene is another example portrayed as common resource: it's open for everyone, but being in a relationship with one person generally excludes simultaneous similar relations with another, though it's accessible to all.

Lastly, public goods are non-excludable and non-rival, like national defense and the court system. National defense, for example, protects all without the ability to exclude someone and without preventing another's simultaneous protection. The court system is available to everyone and using it doesn't preclude another from using it, making it a perfect example of a public good. Even a public road, assuming it’s uncongested, demonstrates these features; it's accessible to all and use by one doesn't hinder another's use.

These four types of goods: private goods, club goods, common resources, and public goods each have unique characteristics that affect their usage and economic implications. As we explore these further in the course, we’ll dive deeper into challenges such as market failures associated with non-excludable goods, which often require regulatory or collective action to manage effectively. Let's move on to the next video for more insights.

Label the goods as Private Goods (PRI), Common Resources (CR), Club Goods (CG), or Public Goods (PUB).

Alright. Let's go ahead and label these goods as private goods, public goods, common resources, and club goods. Okay? So remember when we've got these goods, we're gonna think of the 2 traits. Right? We've got the traits of excludability, excludable or nonexcludable, and over here we'll have the rival or nonrival. Right? We're gonna be basing them on these traits. So when it's rival and excludable that's when we get a private good right. When it's rival and nonexcludable, we get common resources. Excludable and nonrival, that's where we have our club goods, and nonexcludable and nonrival, that's our public goods over here right. So based on that information, let's go ahead and go 1 by 1 and let's do these goods. So first we have a steak dinner, right? What do we think when we got a steak dinner? Well is it rival? First of all, yeah right? If I eat the steak dinner, you can't eat the same steak dinner, right? There's only one of them and one person has to eat it. So it is rival. How about excludable? Yeah, generally you're gonna have to pay for the steak dinner, right? There's a way to prevent people from eating the steak dinner and that's by them not having paid. So it is rival and excludable. We're gonna see that a steak dinner is a private good. I'll put PR there for private goods, right? We've got these acronyms at the top that we'll use. So steak dinner is a private good. Let's go down the row here to the fireworks show. So what about a fireworks show? Alright, let's think about that. Is it rival or let's start with excludable. Is it excludable or nonexcludable? Well, it's kind of tough to exclude someone from a fireworks show, right? They would have to probably build like some giant wall or something to keep people from seeing the fireworks, right? In general, fireworks you can kind of just see from anywhere. So I would say that fireworks are pretty much nonexcludable, right? It's kind of hard to keep someone from seeing them. And how about rival versus nonrival? Well, me watching a fireworks show doesn't stop you from enjoying it also, right, so we can both enjoy the same fireworks show without it affecting the other one. So it's nonrival. We see a nonrival, nonexcludable good here. So we're gonna say that this fireworks show is a public good. Cool? Let's go on to the next one. Forest lumber. How about forest lumber? In this case is it excludable or nonexcludable? Well in this case right, it's nonexcludable, right? Someone can go to the forest and just chop down a tree right? In the absence of any specific laws, you can just kind of go out there and chop a tree down. You can't really exclude someone from using that forest and getting some lumber, but what about rival and nonrival? Well in this case right, if I chop the tree down, you can't chop that same tree down, right? We are rival in consumption for that tree. So it is going to be rival and nonexcludable here. We're going to have common resources. I'm gonna put CR for common resources there. How about traffic signals? Well, traffic signals, are they excludable or nonexcludable? Here we see that they're nonexcludable, right, because me using a traffic signal and waiting for a red light or a green light doesn't stop you from using that same traffic signal, right? We can use the same traffic signal and it doesn't, or excuse me, that would be nonrival, right? Because we're using the same traffic signal and it doesn't affect the other one, right? That's when it's nonrival, we can both use the same amount of the good. It's nonexcludable because there's no way to prevent someone from using the traffic signal, right? It's there, it's available for us to use to direct through traffic, so you can't exclude someone there. It's nonexcludable. Nonexcludable and nonrival, we're gonna have a public good here. Cool. Let's go on to the US Census data, top of the next row. So the US Census data, is that excludable or nonexcludable? Well, US Census data is just public information. The government goes and gets all this data from all of the residents and then it makes it publicly available because it knows that this kind of information is very useful to a lot of different people and a lot of different businesses. So it's nonexcludable, right? They don't keep anybody from accessing this information and it's nonrival also, right? Me accessing the information doesn't take it away from you. We can both access the same quantity of information and it doesn't affect either of us. So it's nonrival and nonexcludable. We have another public good here. How about computer software? Computer software is excludable, right? You usually have to pay to get software. So we're gonna have an excludable good there, and is it rival or nonrival? Well in this case, right, it's nonrival, right? Me using the software doesn't stop you from using the same software, right? Their software is very easily replicated, there's no extra cost to the company providing the software, right? When you get a copy of Windows, everyone's using the same copy of Windows, right? It's just essentially a serial number that you have or something like that. So we have a nonrival situation here and it's excludable. So we've got a club good, right? This is a club good. You have to join the club of the software company to get access here. So computer software is a club good. How about a pair of shoes? So a pair of shoes, right? If I'm wearing a pair of shoes, you can't wear that same pair of shoes. We're gonna be rival in consumption for that pair of shoes, so we're rival there and is it excludable? You usually have to pay for shoes, right? So it's gonna be excludable and rival there. We've got a private good. How about an Incongested Toll Road? So we talked about this one a little bit right. So a Toll Road is excludable right, cause you have to pay to go on the toll road. So it's an excludable good. How about rival or nonrival? When it's uncongested right, it doesn't matter that you're on the road. I can get on the road and you're not going to affect me, right? There's no traffic, I can get on the road and use it just the same. So it's nonrival in that case, right? Nonrival and excludable, we've got a club good. Cool. I love this. We've got a lot of examples here, right? This is great. Let's go on to this next one, City Sewer System. How about the city sewer system? In this case, is it excludable or nonexcludable? Generally, everyone's connected excludable? And is it rival or nonrival? Well, my use of the sewer system doesn't really affect your use, right? We both put all our waste into it, it's nonrival. There's just the one sewer system that we all use together. It's nonrival and nonexcludable, We've got a public good here. Cool. Go on to this car. How about a car? Well, it's gonna be rival, right? Because if I use the car, you can't use the same car, right? We're gonna fight for I guess the driver's seat, right? There can only be 1 person driving this car, right? We're gonna be rival in consumption. Yes, we can carpool, but the idea is that only one person can be like this is where we're going, this is rivaling consumption to use this car. Me owning the car means you can't own the same car, right? Only I can own that copy of that car. And it's excludable right because you have to pay for a car generally unless you're playing Grand Theft Auto or something. So we're gonna have a private good here, right? Private good, excludable and rival. How about WiFi? Well WiFi, right, if I'm connected to a WiFi, it generally doesn't affect your connection to WiFi, right? So in general, we're gonna have this nonrival situation where we can all connect to the same WiFi connection and it doesn't affect each other, right? So it's gonna be nonrival, but it is excludable, right? We set passwords, you have to pay for the Internet service, so it's gonna be excludable here and it's nonrival. You have to join the club to get some WiFi, so this is gonna be a club good. Last but not least, we've got fish in the ocean. We've talked about this one right, this is a great example of common resource right? Because we've got it, it's nonexcludable, right? No one can stop you from going out into the ocean, putting out your rod and catching a fish, but if you catch that fish, I can't catch the same fish. So it's gonna be rival and consumption. Nonexcludable and rival, that gets us to our common resources and there we go. We've gone through quite a bit of examples there. Hopefully, you guys feel a lot more comfortable with the different types of goods, so let's go ahead and move on to the next video.

A slice of pizza is:

• A. Rival
• B. non-rival
• C. non-excludable
• D. both a and c

An example of an excludable good is:

• A. The court system
• B. The public road
• C. National Defense
• D. MP3 Downloads

Here’s what students ask on this topic:

What are the four types of goods in economics?

The four types of goods in economics are private goods, club goods, common resources, and public goods. Private goods are both rival and excludable, meaning only one person can consume them, and they require payment (e.g., cheeseburgers). Club goods are excludable but non-rival, so you must pay to use them, but one person's use doesn't affect another's (e.g., Netflix). Common resources are rival but non-excludable, meaning they can be used by anyone, but one person's use diminishes availability for others (e.g., fish in the ocean). Public goods are both non-rival and non-excludable, meaning they are available to everyone without reducing availability (e.g., national defense).

What is the difference between rival and non-rival goods?

Rival goods are those where one person's consumption of the good reduces the amount available for others. For example, if you eat a cheeseburger, no one else can eat that same cheeseburger. Non-rival goods, on the other hand, can be consumed by multiple people without reducing the availability for others. An example is watching a movie on Netflix; your viewing does not prevent others from watching the same movie. Understanding this distinction helps in categorizing goods and managing resources effectively.

Can you explain the concept of excludability in goods?

Excludability refers to the ability to prevent people from using a good unless they pay for it. Excludable goods require payment for access, such as a Netflix subscription. Non-excludable goods cannot be restricted based on payment; everyone can use them regardless of whether they have paid. An example of a non-excludable good is national defense, where protection is provided to all citizens without exclusion. This concept is crucial for understanding how goods are distributed and consumed in an economy.

What are some examples of public goods?

Public goods are both non-rival and non-excludable, meaning they are available to everyone without reducing availability. Examples include national defense, where the military protects all citizens equally, and the court system, which is accessible to everyone for legal claims. Another example is public roads (when uncongested), which anyone can use without affecting others' ability to use them. These goods are typically provided by the government because they are not profitable for private companies to supply.

How do common resources differ from public goods?

Common resources are rival but non-excludable, meaning they can be used by anyone, but one person's use diminishes availability for others. Examples include fish in the ocean and clean air. Public goods, on the other hand, are both non-rival and non-excludable, meaning they are available to everyone without reducing availability. Examples include national defense and the court system. The key difference is that common resources can be depleted through overuse, while public goods are not diminished by individual consumption.