Private Good
What is Private Good?
A private good is both excludable and rival: people can be prevented from using it, and one person's use reduces what is left for others.
Most goods, such as food and clothing, are private goods. Markets generally provide them efficiently because sellers can charge a price and exclude non-payers. They contrast with public goods, which are non-excludable and non-rival.
Private Good: a worked example
A sandwich cart shows both properties with numbers. At a price of $6, Mara wants 4 sandwiches, Nico wants 3, and Priya wants 2, so market quantity demanded is the horizontal sum 4 + 3 + 2 = 9. Quantities add across at a shared price precisely because each sandwich goes to exactly one person, which is rivalry. The cart makes each sandwich for $2, so revenue is 9 x 6 = $54, cost is 9 x 2 = $18, and profit is $36. Excludability appears when a tenth customer arrives with no money: the cart refuses, and that ability to say no is what lets a price exist at all. Serving that customer anyway would burn $2 of real ingredients, the same fact that makes the good rival.
The mistake students make with private good
Individual demands get added in the wrong direction. Because all three buyers are willing to pay $6, students stack those valuations into $18 of benefit for a single sandwich, borrowing the vertical summation rule that belongs to public goods. Rivalry settles the direction: one sandwich feeds one person, so the three cannot consume the same unit, and their quantities add across at the shared $6 price to give 9 sandwiches. Adding valuations vertically is correct only when every buyer consumes the identical unit at once, which is the property a private good lacks.
Private Good questions
What makes a good rival in consumption?
Rivalry means one person's use physically reduces what remains for everyone else. A bottle of water someone drinks cannot be drunk again, so the cost of serving one more user is positive. Non-rival goods work the other way, since an extra listener to a radio broadcast costs the station nothing and leaves the signal unchanged for existing listeners. Rivalry describes the resource, not how many people want it.
Are goods sold by private companies always private goods?
Ownership does not decide the category. A private firm that lights a harbor cannot stop passing ships from seeing the beam and loses nothing when another ship uses it, so that service is a public good despite the private supplier. Run both tests separately: can non-payers be kept out, and does one person's use shrink what is left? Only a yes to both makes a private good.
Why can markets supply private goods efficiently?
Excludability lets a seller withhold the good until someone pays, so willingness to pay is revealed rather than hidden. Rivalry means the marginal cost of serving another user is positive, so a price equal to that marginal cost sends an accurate signal about how much to make. With no free riding and no spillover, the quantity where supply meets demand is also the quantity where marginal social benefit equals marginal social cost.
Related terms
Common comparisons
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