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Public Good

Definition

A public good is a type of good that is non-excludable and non-rivalrous, meaning that it is available to everyone and one person's consumption does not diminish its availability for others.

Analogy

Imagine a fireworks display in a park. Once the fireworks are set off, anyone in the vicinity can enjoy the show without being excluded, and one person's enjoyment doesn't take away from another person's experience.

Related terms

Market Failure: Market failure occurs when the allocation of goods and services by a free market is inefficient or fails to maximize societal welfare.

Free-Rider Problem: The free-rider problem refers to the situation where individuals can benefit from a public good without contributing towards its provision or maintenance.

Externality: An externality is an unintended consequence of an economic activity that affects third parties who are not involved in the transaction.