Become a Financial Modeling & Valuation Analyst (FMVA)®. Enroll today to advance your career!

Non-Excludable Goods

Public goods that cannot exclude a certain individual or group of individuals from using such goods

What are Non-Excludable Goods?

Non-excludable goods refer to public goods that cannot exclude a certain person or group of persons from using such goods. As a result, restricting access to the consumption of non-excludable goods is nearly impossible. For example, a public road allows practically everyone to use it regardless of the type of motor vehicle they are using, or even if they are just walking.

 

Non-Excludable Goods

 

Non-excludable Goods vs. Excludable Goods

Non-excludable goods and excludable goods are opposites. The former means every single person can access a certain public good and consume it, while the latter refers to goods that restrict some people from using them. Excludable goods are private goods while non-excludable goods are public goods.

For example, while everyone can use a public road, not everyone can go to a cinema as they please. To enter one, a person needs to purchase a ticket, and he should conduct himself according to the policies of the establishment.

 

Non-excludable Goods vs. Non-rivalrous Goods

Most public goods are non-rivalrous. Though few economists say that all non-excludable goods are non-rivalrous, there are also non-rivalrous goods that are excludable. But first, non-rivalrous goods are those goods that can be consumed by the people and the community without affecting the availability of the goods to other consumers.

For example, when a concert or government office decides to put on a fireworks display, everybody can watch it, making the good non-rivalrous because everyone who sees it takes advantages of exactly the same fireworks display. Besides its being non-rivalrous, it is also non-excludable.

 

Non-excludable Goods vs. Rivalrous Goods

While non-excludable goods are free for the use of everyone, making them public, rivalrous goods are private goods wherein people may compete for their consumption of it. For example, a person who buys a car can only use it for himself and restrict others from using it.

Buying petrol and putting it into it the tank is an example of a rivalrous good because it affects the supply available for other consumers. The situation also makes petrol an excludable good.

 

Free Rider Problem

Free rider problems are common in every community. Such a situation happens when there are people who want to use a particular good without giving their fair share or paying for the good. Free riders want to enjoy the benefits of such goods while hoping that someone else will pay for it or help with its maintenance.

For example, a deep well is built for everyone’s use but they are, of course, expected to give their share for its maintenance. Free-riders will just want to use the deep well when they want to without paying for it. Because of such people, the service or product provided may not be enough for all or may be compromised.

Non-excludability is good, but it also affects the society in a negative way.

 

More Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

  • Club Goods
  • Inferior Goods
  • Negative Externalities
  • Normal Goods

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes!