Macmillan Learning nonrival in consumption; nonexcludable nonrival in consumption; excludable excludable; nonrival in consumption nonexcludable; rival in consumption An artificially scarce good is similar to a public good in that it is but it is also similar to a private good in that it is
The Correct Answer and Explanation is:
An artificially scarce good is similar to a public good in that it is nonrival in consumption, but it is also similar to a private good in that it is excludable.
Let’s break down this concept:
- Public Goods: These are goods that are both nonrival (one person’s consumption does not reduce the availability of the good for others) and nonexcludable (it is difficult or impossible to exclude people from using the good). Examples include clean air or national defense. No matter how many people benefit from these goods, each individual’s use doesn’t reduce the amount available for others.
- Private Goods: These are goods that are rival (one person’s consumption reduces the availability for others) and excludable (people can be excluded from using the good). For instance, a sandwich is a private good. If you eat it, no one else can, and the seller can prevent others from getting one.
- Artificially Scarce Goods: These are a bit of a hybrid between private and public goods. They are nonrival in consumption because one person’s use does not diminish the ability of others to use it. However, they are excludable because access to these goods can be restricted, often through pricing. A classic example of an artificially scarce good is digital media or online streaming services (like Netflix). Multiple users can stream a movie at the same time without affecting each other’s experience, but the service can restrict access by charging for a subscription or limiting the number of users per account.
Thus, an artificially scarce good is similar to a public good in that it is nonrival, but like a private good, it can be excludable, which allows the provider to control access or charge for its use.
