ECONOMICS (CBSE/UGC NET)

ECONOMICS

MARKET FAILURES

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
“Benefits cannot be confined to those who have paid for it". This means ____
A
Non-excludability
B
Non-rivalry in consumption
C
Non-excludability
D
None of the above
Explanation: 

Detailed explanation-1: -1. Non-excludability: The benefits derived from pure public goods cannot be confined solely to those who have paid for it. Non-payers can enjoy the benefits of consumption at no financial cost – economists call this the ‘free-rider’ problem-and it means that people have a temptation to consume without paying!

Detailed explanation-2: -Non-excludable goods are public goods that cannot exclude a certain individual or group of individuals from using them. For this reason, it is nearly impossible to restrict access to the consumption of non-excludable goods. A public road is an example of a non-excludable good.

Detailed explanation-3: -Nonexcludable means that it is costly or impossible for one user to exclude others from using a good. Nonrivalrous means that when one person uses a good, it does not prevent others from using it.

Detailed explanation-4: -If a good has a price attached to it, whether it’s a one time payment like in the case of clothing or cars, or an ongoing payment like a subscription fee for a magazine or a per-use fee like in the case of public transport, it can be considered to be excludable to some extent. A common example is a movie in a cinema.

Detailed explanation-5: -both excludable and rivalrous, where excludability means that producers can prevent some people from consuming the good or service based on their ability or willingness to pay and rivalrous indicates that one person’s consumption of a product reduces the amount available for consumption by another.

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