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Microeconomics: Give brief answers to the following:(i) what are the properties of club goods (II) to what extent can a charity - Essay Example

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Microeconomics By Institution Date Microeconomics (i) Properties Of Club Goods According to James Buchanan’s theory of goods, club goods sometimes fall under the subtype of public goods. A public good is a good characterized as non-excludable an un-rivalrous…
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Microeconomics: Give brief answers to the following:(i) what are the properties of club goods (II) to what extent can a charity

Download file to see previous pages... 2012, p. 23). Thus, they are barred from assessing the good or enjoying the service. All private goods are excludable goods, where only those who have paid for either the gods or services enjoy them. Public goods are however non-excludable and people enjoy the good or service without having to pay for them. Economics classify rivalry as a characteristic of a good. I is possible to place a good along a continuum ranging from rivalrous to non-rival. Rivalry defines a good whose consumption by one customer prevents the consumption of the same good by other people at that particular time that the good is in use (Brousseau et al. 2012, p. 23). Non-rivalry defines a condition whereby the level of production, the cost of producing a good to an individual is zero. This however does not mean that the production cost is zero, but rather the marginal costs are zero. Such is a characteristic of club goods, although few qualify as complete non-rivals as marginal costs will arise at some point. Club goods are also naturally monopolies. A monopoly is a situation whereby a single firm provides a majority of sales or provides a most of the services in a market. On the other hand, though, a natural monopoly is a condition affecting the cost technology of an industry where it is convenient for a single firm to produce a particular commodity. In most cases, the largest supplier in the industry holds the role of providing the goods to the people (Brousseau et al. 2012, p. 24). This gives the supplier an overwhelming advantage over other potential competitors in the market. Most of the clubs operate as natural monopolies, especially where they are involved in providing goods to the public. Artificial scarcity is yet another property of club goods. This characteristic defines scarcity of commodities in the market despite of the fact that the industry and the ability to create goods and commodities in abundance. Artificial scarcity refers to non-rival resources since they do not diminish with the increased use by people. This is a characteristic of club goods as they mostly are artificially scarce from the public. They are not easily available like the private goods as the providers are few in the market. (ii) When a charity is classifiable as a club good Club goods are a type of gods classified as public goods and are excludable but are non-rivalrious. Examples of club goods include golf courses, cinemas, cable television as well as services provided by social clubs and religious clubs to their members. When a member of a club or a person receives any form of assistance from other members of the club, this type of good or service comes at no cost. This is defined as an act of charity as these people combine their efforts to provide the needy person with the essential goods or services that they require. The recipient of the good or service does not pay. As such, becomes a club good as the people who provide it does not demand for payment. (iii) Types of charities in Tullock's model of charities In Tullock’s model of charities, there are three types of charities. These charities involve the making donations to the poor people. One type of charity according to Tullock is the donations made by the well-off people to the poor people with the state as the mechanism for giving these gifts to the poor people. In the second view, the poor people use their votes to ...Download file to see next pagesRead More
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