Private goods
Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Private goods are goods that are both rival and excludable. Rival means that what one person uses is not available to others. Excludable means that a person who does not pay can be kept from using the good. Because sellers can charge each buyer, the market supplies these goods well through normal buying and selling. So the government does not need to provide them through the budget.
Example
Clothes, chocolates, cars and a cinema ticket are private goods. If I buy and eat a chocolate, you cannot eat the same one, which makes it rival. The shopkeeper will not hand it over unless I pay, which makes it excludable.
Don't confuse with
- Public goods: these are non-rival and non-excludable, like defence or clean air. The market under-supplies them, so the government provides them.
- Club goods: these are excludable but non-rival until they get crowded, like a toll road. Private goods are rival from the first unit.
Related concepts
- Allocation function
- Redistribution function
- Stabilisation function
- Public goods
- Non-rivalry
- Non-excludability
- Free-rider problem
- Club goods
- Merit goods
- Demerit goods