Private good

A private good is defined in economics as "an item that yields positive benefits to people"^[1] that is excludable, i.e. its owners can exercise private property rights, preventing those who have not paid for it from using the good or consuming its benefits;^[2] and rivalrous, i.e. consumption by one necessarily prevents that of another. A private good, as an economic resource is scarce, which can cause competition for it.^[3] The market demand curve for a private good is a horizontal summation of individual demand curves.^[4]

Unlike public goods, such as clean air or national defense, private goods are less likely to have the free rider problem, in which a person benefits from a public good without contributing towards it. Assuming a private good is valued positively by everyone, the efficiency of obtaining the good is obstructed by its rivalry; that is simultaneous consumption of a rivalrous good is theoretically impossible. The feasibility of obtaining the good is made difficult by its excludability, which means that people have to pay for it to enjoy its benefits.^[5]

One of the most common ways of looking at goods in the economy is by examining the level of competition in obtaining a given good, and the possibility of excluding its consumption; one cannot, for example, prevent another from enjoying a beautiful view in a public park, or clean air.^[6]

Definition matrix

Example of a private good

An example of the private good is bread: bread eaten by a given person cannot be consumed by another (rivalry), and it is easy for a baker to refuse to trade a loaf (exclusive).

To illustrate the horizontal summation characteristic, assume there are only two people in this economy and that:

Person A will purchase: 0 loaves of bread at $4, 1 loaf of bread at $3, 2 loaves of bread at $2, and 3 loaves of bread at $1
Person B will purchase: 0 loaves of bread at $6, 1 loaf of bread at $5, 2 loaves of bread at $4, 3 loaves of bread at $3, 4 loaves of bread at $2, and 5 loaves of bread at $1

As a result, a new market demand curve can be derived with the following results:

Price per loaf of bread	Loaves of bread
	Person A	Person B	Total
$6	0	0	0
$5	0	1	1
$4	0	2	2
$3	1	3	4
$2	2	4	6
$1	3	5	8

References

^ Nicholson, Walter (2004). Intermediate Microeconomics And Its Application. United States of America: South-Western, a division of Thomson Learning. p. 59. ISBN 0-324-27419-X.
^ Ray Powell (June 2008). "10: Private goods, public goods and externalities". AQA AS Economics (paperback). Philip Allan. p. 352. ISBN 978-0-340-94750-0.
^ Hallgren, M.M.; McAdams, A.K. (1995). "A model for efficient aggregation of resources for economic public goods on the internet". The Journal of Electronic Publishing. 1. doi:10.3998/3336451.0001.125. hdl:2027/spo.3336451.0001.125.
^ "Public Goods: Demand". AmosWEB Encyclonomic WEB*pedia. AmosWEB LLC. Retrieved 23 October 2011.
^ Malkin, J.; Wildavasky, A. (1991). "Why the traditional distinction between public and private goods should be abandoned". Journal of Theoretical Politics. 3 (4): 355–378. doi:10.1177/0951692891003004001. S2CID 154607937.
^ "Rivalry and Excludability in Goods". Living Economics. Retrieved October 22, 2011.

[1] Nicholson, Walter (2004). Intermediate Microeconomics And Its Application. United States of America: South-Western, a division of Thomson Learning. p. 59. ISBN 0-324-27419-X.

[2] Ray Powell (June 2008). "10: Private goods, public goods and externalities". AQA AS Economics (paperback). Philip Allan. p. 352. ISBN 978-0-340-94750-0.

[3] Hallgren, M.M.; McAdams, A.K. (1995). "A model for efficient aggregation of resources for economic public goods on the internet". The Journal of Electronic Publishing. 1. doi:10.3998/3336451.0001.125. hdl:2027/spo.3336451.0001.125.

[4] "Public Goods: Demand". AmosWEB Encyclonomic WEB*pedia. AmosWEB LLC. Retrieved 23 October 2011.

[5] Malkin, J.; Wildavasky, A. (1991). "Why the traditional distinction between public and private goods should be abandoned". Journal of Theoretical Politics. 3 (4): 355–378. doi:10.1177/0951692891003004001. S2CID 154607937.

[6] "Rivalry and Excludability in Goods". Living Economics. Retrieved October 22, 2011.

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Private good

Private good

Private good

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Hub overview

Root Wikipedia Article

Private good

Definition matrix

Example of a private good

References