Chapter 11 Journal

In Chapter 11, Mankiew introduces the different kinds of goods, and how people value them. Goods differed in whether they are excludable and whether they are rival in consumption. A good is excludable if it is possible to prevent someone form using it. Opposed to that, a good is rival in consumption of one person’s use of the god reduces other people’s ability to use that same good. The four different types of goods are public goods, private goods, common resources, and natural monopolies. This chapter focused specifically on public goods and natural resources. Markets tend to work best for private goods, and not as well for other types of goods. Private goods are both excludable and rival in consumption. Public goods, however, are neither rival in consumption nor excludable. Examples of public goods include firework displays, national defense, and the creation of fundamental knowledge.  Now, because people do not have to pay for their use of public goods, then they have an incentive to free ride when the good is provided privately. Therefore, governments provide public goods, making their decision about the quantity of each good based on cost-benefit analysis. Common resources are rival in consumption but not excludable. Examples include common grazing land, clean air, and congested roads. Because people are not charged for their use of common resources, they tend to use them excessively. Therefore, governments use various methods to limit the use of common resources. I would rate this chapter a difficulty rating of 1.5/3. I have a small trouble identifying whether a good is a public good or a common resource.