Market structure and economic organization

Business

According to different sources, a public good is a good for which "consumption of the good by one individual does not reduce availability of the good for consumption by others; and that no one can be effectively excluded from using the good" (Mas-Colell, Whinston & Green, 1995). The latter part of the definition is perhaps most important: these goods are difficult to exclude from the public necessity and are available to a large, if not complete portion of the society.

Most likely, public goods can be identified with some of the goods that are made available by the government, such as national defense. With national defense, although not a palpable good, it is readily available for all, in the sense that all can have access to the benefits that this type of good provides, namely increased national security and, as such, increased individual security.

At the same time, following the definition for public goods, the private goods have two essential characteristics that public goods do not have: they are excludable and rivalrous. The excludable characteristic means that the respective private good is available only to a certain category of consumers, usually those who have paid its monetary value and have gained property for the good. The exclusion comes from the fact that this is not a good available for all categories of consumers: those who have not paid for the good, do not have access to it.

As mentioned, the private goods are also rivalrous. By rivalrous, one means that the consumption of the good is individual or familial rather than collective. This characteristic of the private good can be derived from the previous one: reduced and exclusive availability also somewhat implies individual consumption, mainly because the good is not available for all people in the society.

Between these two main categories, depending on the level of exclusion and rivalry, there are two additional types of goods: common resources and natural monopolies. Common resources are rival, but not excludable. Usually, these are the types of goods to which all have access in principle, but their exploitation is limited on the capacity of the individual or groups of individuals to actually commit to their exploitation. If one refers to a coal mine, for example, the rivalry comes from the ability to produce coal on that mine, which goes anywhere from obtaining the governmental approval to having the right financial backing to do this.

With natural monopolies, these are excludable, but not rival. Examples in this area can range from fire protection to cable TV, anywhere along the lines of the general characteristics of this category of goods.

In terms of the labor market and labor market equilibrium, the functionalities are similar to all of the other market, with supply and demand on the market working towards establishing the right price and quantity for the respective resource (in this case, the labor force). An exceeding supply of workers on the labor market amounts to a lower price for that respective resource, as well as to potential unemployment. Realistically, this may also lead to unemployed, without the market providing the right amount of positions for that respective category of workers. When there is an excess in demand, the wage goes up, because those workers are more required on the market, in the conditions of a shortage for that respective category of individuals.

The main different from other market is that the supply curve does not necessarily show the available workers in a certain industry at a certain time, but rather the total amount of workers who are willing to work for a certain wage in a certain industry. This is somewhat smaller than the actual total amount of workers in the industry.

The examples here can range from different domains. With the IT industry, for example, the wage tends to be rather high, mainly because this is a very specific industry, requiring a large amount of technical studies and a smaller number of those who actually can perform these. Other jobs with an excessive amount of workers prepared for that field will tend to have a lower pay, such as the metallurgical industry.