Key Idea: Topic 2.9 explains why the market completely fails to provide public goods, and why government must step in. This is the most extreme form of market failure — zero private provision.
✅ Core definitions
📊 The goods matrix (must-know)
Learn the 2×2 matrix: rows = rivalrous/non-rivalrous, columns = excludable/non-excludable. Be ready to classify any good.
🏛️ Government provision
⚖️ Evaluation
✅ Pros: Solves free-rider problem. Ensures essential goods exist. Benefits everyone equally.
❌ Cons: No price signal → hard to know optimal quantity. Government failure risk (over/under-provision). Opportunity cost of taxation.
The key distinction: externalities cause under-provision. Public goods cause zero provision. This is why public goods are a more complete market failure.