Public Goods and Private Goods

Public goods refer to those goods and services which cannot be divisible in consumption and if provided are equally available to all. That means no one can be excluded from enjoying the benefits of public goods if he does not pay for it voluntarily. Examples of such goods are national defence, lighthouse, pubic roads etc. Since exclusion principle is not applicable, pricing of pure public good would be difficult and such a good would not be supplied by the market. It is generally supplied by the government.

Private goods are divisible in consumption. An individual can be prevented or excluded from consuming the good if he or she does not voluntarily pay for them. Private goods are supplied by the market at a price. If ‘A’ pays the price of a private good, say apple, he alone gets its benefit while ‘B’ who does not pay is excluded. This implies that the benefits of private goods internalised and its consumption is rival. Examples of private goods are dress. House,car, pen, medicine etc.

Distinction Between Public Goods and Private Goods

Public Goods	Private Goods
Exclusion principle is not applicable. Consumption is non-rival, i.e. consumption by one person does not reduce the consumption by another. The marginal cost of public goods for an extra consumer is zero. It is generally supplied by the govt. through tax-finance.	Exclusion principle is applicable. Consumption is rival, i.e. consumption by one person reduces the consumption by another. The marginal cost of providing a private good to an extra consumer is positive. It is supplied by the market at a price.