Private Goods

Published Jan 16, 2023

Definition of Private Goods

Private goods are goods that are excludable and rival in consumption. Excludable means they can be withheld from people who do not pay for them. Rival means that if they are consumed by one person, this prevents another person from consuming them. In that regard, private goods differ from public goods, which are non-excludable and non-rival, for example.

Example

A common example of a private good is a can of soda. It is excludable because if you own it, you can prevent other people from accessing or even seeing it. Similarly, as the owner of the can, you can decide to consume it yourself, which means no one else can drink it anymore (hence, it is rival).

Other examples of private goods include cars, books, and clothes. In fact, chances are that the majority of all the goods you come across in your daily life are private goods.

Why Private Goods Matter

Private goods are important because they are the basis of a market economy. That means they are the goods that are bought and sold in the market. Thus, they are the main source of income for businesses.

In addition to that, they are important for the efficient allocation of resources. That means of all the types of goods, they are the ones that are produced and consumed in the most efficient way (i.e., because they don’t lead to any market failures).