Micro 2/14/12

4. Public goods: non rival and non excludable (ex. highway, park, ***orange balls on power line, lights on buildings, lighthouses, national defense***)

  • Private Goods: Rival and Excludable
  • Rival: if I am using it, you can’t
  • Excludable: can stop people from using the good
Free Rider Problem
I can use the good even if I didn’t pay for it (under provided; solution: tax)

Post office is not a public good (just because government makes it, does not mean it is a public good

5. Income distribution

  • the 1% that is very rich
  • unequal (the market does not treat everyone equally)(opinion based market failure)
  • fix: maximum salaries (less incentive to work hard); step 1. progressive income tax (as income rises, the percent you pay in tax is increased); step 2. Welfare programs (transfer money like Robin Hood)(done In Kind or In cash)
  • In Cash: get a check (is not tracked)(TANF)(Social Security)(SSI)(unemployment)
  • In Kind: coupons or vouchers used on a specific thing (food stamps)(WIC)(HOPE)(housing)(***medicaid/medicare- the largest ones***)


END FOR EXAM 1

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