What are Non-Rivalrous Goods?
Non-rivalrous goods are public goods that are consumed by people but whose supply is not affected by people’s consumption. In other words, when an individual or a group of individuals use a particular good, the supply left for other people to use remains unchanged. Therefore, non-rivalrous goods can be consumed over and over again without the fear of depletion of supply.
One example of non-rivalrous goods is a television show. When a show is aired on TV, and a group of twenty people watches it from their home, other groups of people watching the show get to watch exactly the same show, regardless of how many of them are actually watching it together.
Another example would be air. Every single person, from whatever sector in society, can actually breathe the same air from wherever they are in the world. One person’s breathing does not – at least not noticeably – affect the amount of air there is left for other people.
Rivalrous vs. Non-rivalrous
Goods can either be rivalrous or non-rivalrous. Being the opposite of non-rivalrous goods, rivalrous goods are goods that only one person can consume, such as a piece of chicken in a bucket.
Say, for example, the bucket contains eight pieces of various parts of a chicken. This means that only eight individuals can ideally consume it, and the ninth person may not receive a share. Unlike non-rivalrous goods, rivalrous goods mean that its consumption by one person affects the overall supply of the goods.
Non-rivalrous Goods and Non-excludable Goods
A non-rivalrous good that is also non-excludable is the most ideal kind of public good. In short, it is the perfect public good.
A product that is non-excludable means that it is difficult or even almost impossible to prohibit any person from using the good. For example, if a local government unit puts a flood control system in a city close to the river to protect it during extreme weather conditions, everyone in that community or city benefits from the flood control system, even if some people do not agree to it.
Another example is a public park being accessible to everyone, even to people who are not from that city. Also, a fireworks display lets everyone enjoy the show. Note that these examples are also non-rivalrous because they do not get altered by more people using them.
The flood control system protects everyone in the same way. The public park offers the same shelter to everyone. The fireworks display shows the same lights and colors to all spectators.
Rivalrous Goods and Non-excludable Goods
Goods can also be non-excludable but rivalrous, which means that everyone can access them. Still, their consumption can affect the overall supply and the units left for other consumers to use.
For example, students in a dormitory experiencing poor water supply can use tap water for bathing and other purposes anytime. However, the supply may not be the same for everyone. The more people who use the water, the lesser the supply becomes for residents who want to use the water at a later time.
Non-rivalrous + Non-excludable Goods = Public Goods
Public goods are services and products that are given to consumers by the government. They come in two types – public goods and private goods. Public goods are described as non-excludable and non-rivalrous.
Therefore, if a specific good is both non-excludable and non-rivalrous, it is considered a public good. This means that all people benefit equally from it, and no one is denied access to it. Also, the consumption of the goods by one person does not affect the supply available for consumption by another person.
CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)® certification program, designed to transform anyone into a world-class financial analyst.
To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below: