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Private Good: Definition & Examples

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  • 0:01 Definition of a Private Good
  • 0:45 Characteristics of…
  • 1:44 Examples of Private Goods
  • 2:18 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson, we will define private good. We will compare it to a public good and provide examples. This will be followed by characteristics and a conclusion that helps capture the main points.

Definition of a Private Good

In today's world, there are many goods available for consumers. We can purchase clothing and food, and we can benefit from the utilization of streetlights on a dark night. However, there is a big difference between those goods that we purchase and those that are offered to us free of charge. Differentiating between the two types, helps us understand what a private good is and what a public good is.

Let's take a look at a few definitions to help us get started. A private good is a good that is purchased and used by one party and is not available to others. A public good is a good that is offered free to consumers. Now that we know the difference between the two, we will look deeper into the characteristics of private goods and discuss examples to provide clarity.

Characteristics of Private Goods

In order for a good to be a private good, three characteristics need to be met. They are as follows:

1. Excludability - This means that consumers can be excluded from the consumption of the goods if they do not pay the seller for the good. Some examples of this include buying a ticket to an amusement park or purchasing a meal at a restaurant. If the consumer does not pay for the ticket, they will not receive the ticket and therefore can't enter the park. The same can be applied for a meal at a restaurant. If the consumer does not pay for their meal at a fast food restaurant, the seller will not give them their food.

2. Rivalry - When a good is used or purchased by an individual that leaves less of the good available for others. For example, if you purchase a car off a lot, that car is no longer available for others to purchase.

3. Rejectability - This means, if a consumer does not like the good, they can reject it. When you go to a restaurant and do not like the daily special, you can reject it and purchase something else on the menu.

Examples of Private Goods

Now that we know what characteristics make up a private good, let's look at an example that incorporates them.

Take, for example, my neighbors boat. The manufacturer only made a small number of boats that are bright red; therefore, the supply is limited and not everyone can own one. This makes the boat rival. My neighbor also does not have to let anyone else take his boat out on the water. This makes his boat excludable. Lastly, if he did not like the color of the boat when he went to the dealership, he did not have to purchase that particular boat. This makes the boat rejectable.

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