Applied Learning # 2

Covid-19 Economics

1. Define the term market failure.

Market failure is a situation in which the allocation of goods and services by a free market is not efficient, often leading to a net loss of economic value.

2. Define what is an externality and how it relates to market failure.

An externality stems from the production or consumption of a good or service, resulting in a cost or benefit to an unrelated third party. Externalities lead to market failure because a product or service's price equilibrium does not accurately reflect the true costs and benefits of that product or service.

3. Provide few (at least 3) examples of positive and negative externalities and explain why they are externalities.

A) Air pollution – Negative, harms society.

B) A Beekeeper who keeps the bees for their honey – Positive, beneficial.

C) Education consumption when its beneficial to you and the society – Positive

D) Cigarette Smoking – Negative, harms society.

E) Driving while intoxicated – Negative, harms society.

F) Gym Memberships – Positive, benefits society.

4. Consider some of the issues related to Covid-19 pandemic.

Provide at least one example of people’s behavior that could be classified as a positive externality and one as a negative externality. Explain your answer and provide some evidence, such a links to newspaper articles.

A) Individuals staying home, also wearing masks and taking precautionary methods to help contain the virus. – Positive

https://journalofethics.ama-assn.org/article/ethics-quarantine/2003-11

B) Individuals not staying home, and not maintaining social distancing disrupting the integral aspect of health care. -Negative

https://nymag.com/intelligencer/2020/03/stay-inside-for-the-health-of-the-elderly-and-sick.html

5. What are rival or rivalrous goods? Provide 3 examples and explain/justify your answer.

Rival goods are types of goods that may only be possessed or consumed by a single user. These items can be durable, meaning they may only be used one at a time, or nondurable, meaning they are destroyed after consumption, allowing only one user to enjoy it.

A) Food and consuming it.

B) Clothes

C) Phones

These items are considered rival because they can only be used or occupied by one person, competition is created for their consumption. Consumers, therefore, become rivals in an attempt to obtain them.

6. What are non-rival or non-rivalrous goods? Provide 3 examples and explain/justify your answer.

Non-rivalrous goods are public goods. Everyone has access to use them, and their use does not deplete their availability for future use.

A) Cable Television

B) Satellite Radio

C) Street Lights

These items are nonrivals goods because they can used or occupied by everyone. These goods are consumed by people, but the supply is not affected by people's consumption.

7. What are excludable goods? Provide 3 examples and explain/justify your answer.

A good is excludable if the supplier of that good can prevent people who do not pay from consuming it.

A) House

B) Swimming Lessons

C) Pets

These items are excludable goods because the producers can prevent some people from consuming the good or service based on their ability or willingness to pay

8. What are non-excludable goods? Provide 3 examples and explain/justify your answer.

Non-excludable goods refers to public goods that cannot exclude a certain person or group of persons from using such goods.

A) Parks

B) Beaches

C) Roads

9. Define private goods? In your definition make sure that you use rive/nonrival and excludable/non-excludable terms. Provide 3 examples and explain/justify your answer.

A private good is a product that must be purchased to be consumed, and consumption by one individual prevents another individual from consuming it. Private goods are excludable and rival, in other words they are considered to be a private good if there is competition between individuals to obtain the good and if consuming the good prevents someone else from consuming it.

A) Clothes

B) Food

C) Flowers

10. Define public goods? In your definition make sure that you use rive/nonrival and excludable/non-excludable terms. In addition, how are public goods related to market failure? Provide 3 examples and explain/justify your answer.

Public goods known as a social goods or collective goods, are goods that are both nonexcludable and nonrival, meaning individuals cannot be excluded from use or could benefit from without paying for it, and where use by one individual does not reduce availability to others.

A) Water

B) Air

C) Road System

Water and air can be polluted: Water flows can be tapped beyond sustainability, and air is often used in combustion, whether by smokers, factories etc. Roads can be exposed to debris. All public goods, these items arise in the outcome of social functioning.

11. What is a free rider?

Free riders are people who will inevitably choose to use the good and yet decline to help pay for it. They use public/common goods without paying fees or taxes for it . People who refuse to pay their taxes, for example, are essentially taking a “free ride” on revenues provided by those who do pay them, as do turnstile jumpers on a subway system.

12. Define common goods? In your definition make sure that you use rival/nonrival and excludable/non-excludable terms. In addition, how are common goods related to market failure? Provide 3 examples and explain/justify your answer.

Common goods are defined as the goods that are rivalrous and non-excludable, whether the consumption of a good by one person precludes its consumption by another person (rival) whether it is possible to prevent people who have not paid for it from having access to it (excludable).

A) Museums

B) Public Schools

C) Free Speech

13. What is meant by “the tragedy of the commons”?

The tragedy of the commons is a problem that occurs when individuals exploit a shared resource to the extent that demand overwhelms supply and the resource becomes unavailable to some or all. Depletion of non-renewable resources is an example of the tragedy of the commons in action.

14. What are club goods? In your definition make sure that you use rive/nonrival and excludable/non-excludable terms. In addition, how are club goods related to market failure? Provide 3 examples and explain/justify your answer.

Club goods (scarce goods) are goods which are sometimes classified as a subtype of public goods that are excludable but nonrival, at least until reaching a point where congestion occurs. Often these goods exhibit high excludability, but at the same time low rivalry in consumption.

A) Cinemas

B) Television

C) Copyrights

15. Put the terms 1) private goods, 2) public goods, 3) common goods, and 4) club goods into the following table:

Rival Non-Rival

Excludable - Private Goods - Club Goods

Non-Excludable - Common Goods - Public Goods

16. In the context of this pandemic, provide an example to explain the concept of a private good. What should the government role be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

Food is a great example of a private good during this pandemic, water as well. The concept of a private good is considered as an item that yields positive benefits to its consumer and is excludable. The Government should provide all methods available in order to receive these goods for under privileged families and individuals. Some public policies should include the expansion of food assistance benefits to people who do not have access to food and water.

https://www.nytimes.com/2020/03/20/us/coronavirus-poverty-school-lunch.html

17. In the context of this pandemic, provide an example to explain the concept of a public good. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

Outside exercise and parks are examples of public goods during this pandemic. The concept of a public good is that individuals cannot be excluded from use or could benefit from without paying for it, and where use by one individual does not reduce availability to others. During this pandemic, the government should grant individuals the availability of parks, of course with proper precaution, in order to keep up with daily exercises. Some public policies should include regulations of parks.

https://www.cdc.gov/coronavirus/2019-ncov/daily-life-coping/visitors.html

​18. In the context of this pandemic, provide an example to explain the concept of a free rider. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

An example of a free rider in the midst of this pandemic would be someone who would use goods that are meant for those in dire need, or those who purchase more goods than allowed and not pay the fee or taxes for them. Goods like masks, food etc. Some policies which are already in place are the limitations on disinfectant purchasing, etc

https://www.amny.com/coronavirus/online-fraud-increases-as-thieves-use-coronavirus-to-steal/

​19. In the context of this pandemic, provide an example to explain the concept of a tragedy of the commons. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material. Few Interesting Economics Research Articles Related to COVID-19 pandemic.

An example of the concept a tragedy of the commons would include a situation where individual users are acting independently according to their own self-interest and act contrary to the common good of all users by depleting or spoiling the shared resource through their collective action. Example, a tragedy of the commons occurse when self-interest conflicts with the actions that need to be taken for the greater good. Hoarding of groceries and personal protective equipment are simple examples. Everyone wants to make sure they are prepared for a government-mandated quarantine. But these individual preparations create stress on common resource systems that lead to unintended outcomes. Some public policies the government can enforce is limiting the amount of necessities such as masks, gloves etc, a person can own.

https://www.livescience.com/are-face-masks-effective-reducing-coronavirus-spread.html