We use them every day. They are responsible for our very survival, as well as much of our daily pleasures. Yet, many of us hardly give a second thought to the different traits of different goods and what that means for how they fit into the economy. People, that stops today.
Goods are characterized based on two question. Are they rival in consumption? In other words, does my consumption of a good harm your ability to consume the same good? Also, are they excludable? In other words, is it possible to prevent individuals from consuming the good?
Goods are placed into four different categories based on how what the answers to these two questions would be.
Private Goods- Private goods are both rival in consumption and excludable. These goods are what people generally imagine when they here the word "good." (Not us economists, though!) Because private goods are excludable, a price can be set to purchase them. As an example, you would be able to sell a can of food because people are not able, normally, to obtain the good without your permission, but you would not be able to sell a sunny day because you cannot prevent people from consuming it. Other examples include toothpaste, a chair, and an ice cream cone.
Public Goods- Public goods are neither rival in consumption or excludable. Because they are not excludable, they cannot be sold and are "free" for the public to consume. Examples include a sunny day, a nation's armed forces, and a national park.
Club Goods- Club goods are excludable but not rival in consumption. Because they are excludable, they can be sold. The stereotypical example, and where it gets its name from, is being a member of a club that excludes other individuals. These clubs do, in fact, often sell their activities and possessions.
Think of some of the privileges of being apart of a country club. Which of these are club goods, and which are private goods?
Common Resources- Common resources are goods that are rival in consujmption but not excludable. Again, the fact that these goods are not excludable prevents them from being sold. Unlike other non-excludable goods, though, these goods provide less value the more people consume them. Without the price mechanism to regulate supply and demand, these goods are often overused. This problem is called the Tragedy of the Commons. Examples of common resources include a fishing waters in the ocean.