BACHELOR OF BUSINESS ADMINISTRATION WITH HONOURS

(SARJANA MUDA PENTADBIRAN PERNIAGAAN DENGAN KEPUJIAN)

SEMESTER 4 / 2022

BBEK1103

PRINCIPLES OF MICROECONOMICS
 TABLE OF CONTENT
NO PAGE
1.0 INTRODUCTION 1

2.0 THE FOUR DIFFERENT TYPES OF GOODS IN THE 1

ECONOMY
2.1 Public Good 1-2
2.2 Private Good 2-3
2.3 Common Resources 3
2.4 Monopoly Good 3-4

3.0 INTRODUCTION TO CHOSEN PRIVATE GOOD 4-5

CAR-Proton Brand

4.0 CHARACTERISTIC OF CHOSEN PRIVATE GOODS 6

4.1 Excludability by Seller 6-7

4.2 Rivalry in Consumption 7
4.3 Rejectable 7
4.4 Traded in Free Market 7-8
4.5 Opportunity Cost 8

5.0 DIFFERENCE BETWEEN PRIVATE GOODS 8

AND PUBLIC GOODS
5.1 Rivalry 9
5.2 Excludability 9
5.3 Free Riders’ Problem 9-10
5.5 Demand Curve 10-11
6.0 Summary 12

7.0 REFERENCE 13-14

8.0 TASK 2-OCP 15-19

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1.0 INTRODUCTION

An economic good is a product or service that businesses provide to consumers to meet

their needs and desires. When we want to buy something, we go to the store or go online and
exchange money for it. As a result, any good or service for which we exchange resources in
the form of money or labor qualifies as an economic good. In other words, an economic good
is a product or service that can be sold for a price to a business, individual, government, or
other organization. It's vital to remember that economic goods are scarce, which is why
they're called ‘economic’ goods(McEachern,2005). We must make the most efficient use of
these resources.

2.0 THE FOUR DIFFERENT TYPES OF GOODS IN THE ECONOMY

As shown in the below figure in 2.0, there are four sorts of economic goods namely
public goods, private goods, monopoly goods, and common resources each of which is
defined by four variables characteristics. They are non-rivalrous, rivalrous, non-excludable,
and excludable are the four types (“The Four Different Types of Goods”,2019).

Figure: 1.0 – 4 Different Types of Goods

Source: https://knoweco11.blogspot.com/2020/11/types-of-goods.html

2.1 Public Goods

Public goods are commodities or services provided by nature or a country's
government either for free or by taxing a few people in order to provide mass benefit to the
public in general. These goods and services help to improve a country's infrastructure and
standard of living. The advantages of public goods are that people benefit greatly from them.
These items can be used by a large number of people or the general public at the same time.
These are usually free of charge and can be used by both rich and poor people equally. The

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primary goal of such goods is to provide essential amenities to the general public while also
promoting social welfare and national development. Public goods have two main
characteristics, that is non-excludable and non-rivalrous, this means that no one can be
prevented from consuming them, and people can use them without reducing their availability
to others (Allen et al.,2013). Examples of public goods are national defense, police
protection, law and order, flood control systems, traffic lights, street lighting, public
monument, public beaches, and roads.

Figure 2.0- Street Light: A street light is an example of the public good. It non-

excludable and non-rival in consumption.

Source: https://www.manufacturer.lighting/info/238/

2.2 Private Goods

Private goods are products or services that are manufactured or produced by businesses
owned by entrepreneurs who aim to meet the needs of their customers in order to profit
from the trading of such goods in the free market. Consumers' personal needs are met by
private goods(Hui & Png,2005). The advantages of private goods are that they have mutual
benefits for both the manufacturers and the consumers, who serve their purposes by selling
and purchasing such products, respectively. Private goods are required to conduct economic
development trade activities. It is done with the intention of making money for the
entrepreneurs. Private goods have two main characteristics, that is excludable and rivalrous.
That means it is possible to prevent someone to own the goods and it is only can be
consumed once. In everyday life, examples of private goods abound, including food,
clothing, house, car, and nearly all other goods available for purchase in a store.

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Figure:3.0 – Ice Cream Cone

An ice-cream cone is an example of a private good. It is excludable and rival
Source: https://www.myrecipes.com/recipe/ginger-peach-ice-cream-cones

2.3 Common Resources

Common resources are goods that are non-excludable but rival. This means that we
cannot prevent people from using non-excludable sources but if one person uses or consumes
it, others will be unable to do so at the same time (rivalry). Examples of, common resources
are fish in the ocean, crowded toll roads, and natural environments. The nature of common
resources will lead to a problem known as “the tragedy of commons” in which everyone
wants to use goodness as much as possible. In the end, this will result in the extinction of the
item(Mansfield, 1987). For example, there are only a limited number of fish in the ocean. As
a result, if everyone catches as many fish as they can, there will be no more fish in the ocean
at some point in the future. However, these fish are not an excludable good because it is
difficult to prevent fishermen from taking fish from a vast ocean. Other examples of common
resources are timber, coal, and pasture.

Figure 4.0: Bluefin Tuna Caught in Net-Because of overfishing, fish

The population are on the verge of extinction

Source: Common Resources | Boundless Economics (lumenlearning.com)

2.4 Monopoly Goods

Monopoly goods, also known as natural monopolies, are non-rival goods but
excludable. In other words, the item can be used by multiple people at the same time, but it
may be designed to prevent a specific group of people from using it. In terms of non-rivalry,

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an example of a monopoly good is an uncongested tolled highway where different people can
use the uncongested highway at the same time. However, the fact that you are using the
highway does not preclude others from doing so as well. Meanwhile, because the highway is
tolled, certain groups of people who cannot afford (or do not want to pay) the toll may be
denied access to it (Munzarina Ahmad Samidi et al.,2021). Other examples of monopoly
goods are the internet, cinema, private park, and Wi-Fi.

Figure 5.0 – A non-congested toll road

A toll road that is not congested is an example of a monopoly good. It is possible to prevent
someone from using it simply by denying them access, but it is not a rival good.

Source: https://www.alamy.com/stock-photo/uncongested-road.html

3.0 INTRODUCTION TO CHOSEN PRIVATE GOOD

 CAR- PROTON BRAND

A private good is a product or service produced by a privately owned business that is

purchased to increase the buyer's utility or satisfaction and to make money by trading goods
on the open market. The majority of goods and services consumed in a market economy are
private goods. For example, a car, house, grocery shopping, handphone, clothes, dinner at a
restaurant, an airplane ride, and many more. As a result, a private good is any item that can
only be used or consumed by one party at a time and is only available to those who can afford
it. For this assignment, I chose a Proton-branded car as an example of private goods. Below is
the brief history of Proton company.

Perusahaan Otomobil Nasional Berhad (PROTON) is a Malaysian automotive

company and automobile corporation involved in car design, manufacturing, distribution, and
sales. Malaysia's national car brand is Proton Car. The brand was established at the request of
the Malaysian government in the early 1980s, and it later reverted to semi-private ownership
under DRB Hicom. Zhejiang Geely Holding Group bought 49.9% of Proton Cars.

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In the 1980s and 1990s, Proton was a manufacturer of rebadged versions of Mitsubishi
Motors (MMC) products. In the year 2000, Proton produced it is first indigenously designed
(though Mitsubishi-engineered) non-badge engineered car, elevating Malaysia to the 11th
country in the world with the capability of designing cars from the ground up. Proton has
produced a mix of locally engineered and badge-engineered vehicles since the 2000s.

Proton's production models include the Wira, Waja, Perdana V6, Preve, and others, but the
most recent model is the X70. The engine range of 1.3, 1.5, 1.6, 1.8, and 2.0 liters caters to a
wide range of customers both domestically and internationally. PROTON establishes its
brand as a competitive and innovative car on a global scale. PROTON achieves this goal by
producing valuable and innovative products. As a result, it contributes to Malaysia's Vision
2020 achievement(Proton holdings, 2003).

These are some historical facts about the Proton brand. A car is a vehicle that transports
passengers from one location to another. It is the consumer's choice what brand of car they
need to buy as per their choice to own it as their private goods. It is now one of society's most
private and necessary goods. There are local car manufacturers. The Proton is Malaysia's
most popular vehicle, with high consumer demand. To own a car as a private good, certain
characteristics are needed. In the following section, I will describe the characteristics of the
selected private goods.

Figure: 6.0 – Proton Logo

Source: https://www.carlogos.org/car-brands/proton-logo.html

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4.0 CHARACTERISTIC OF CHOSEN PRIVATE GOODS

 CAR-PROTON BRAND

Perusahaan Otomobil Nasional Berhad (PROTON) is a private good that can be

excluded and has a rivalry in nature. Cars are an example of a private item because some
people are prohibited from owning or using them, and they can only be owned or used by one
consumer at a time. These are goods that behave "normally" in terms of supply and demand
for private goods that meet the consumer's personal needs(Frank,2005). As a car
manufacturer, Proton refers to private goods for producing goods or services used by
individuals that can be provided for profit by the firm. In other words, Proton is willing to
build cars because they can profit from selling them to customers. Private goods have two
main characteristics: rival and excludability. Other characteristics that can be attributed to a
car as private good include rejectable, traded in a free market, and opportunity cost.

Figure 7.0: Characteristics of Private Goods

Source: https://theinvestorsbook.com/public-goods-vs-private-goods.htm

4.1 Excludability by Seller

The term "excludability" refers to the ability or willingness of producers to prevent

some people from consuming a good or service based on their ability or willingness to pay.
An individual does not have ownership or control over the item purchased if he or she
chooses not to pay. The owner of the good can decide how it will benefit them, or they can
choose to pass ownership onto another individual, as long as an exchange is made (usually
monetarily) and the exchange is permitted (Meyer,2010). Cars are excludable private goods.
This means that if a consumer does not pay the seller for the goods, they may be barred from
using them. So, in the case of the Proton, if a person does not pay for it, the dealer will not
give him/her the keys and ownership title. You would have been denied ownership. Protons
must be purchased by an individual to be owned by them, and they may be the only ones who

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can drive them. You can go to your Proton dealership and find exactly what model of Proton
you are looking for. But you can't just drive the car off the lot if you are unable to pay for it.
You must pay the dealer to own the car. Once you pay for your new Proton, it will be yours
and it is a private property right. Excludability is an important feature of private goods
because it refers to the fact that firms will only offer goods and services if willing buyers are
willing to pay the price that they are asking for. Only then will the companies be able to
profit from their investments(Munzarina Ahmad Samidi et al.,2021).

4.2 Rivalry in Consumption

Consumption rivalry refers to the situation in which, after a consumer purchase and
consumes a specific product, the same product simultaneously is no longer available for
purchase or consumption by another consumer (McConnell & Bruce,1999). When one
person's consumption or use interferes with another's ability to consume a good, it is said to
be a rival. Protons are rivals because only a limited number are produced. Other customers
will be unable to purchase a particular Proton modal once the supply is depleted. For
example, if a person buys a Proton X70 limited edition model with a special color, the same
model won’t be available for another person to purchase because there is only a limited
number of cars produced.

4.3 Rejectable

Consumers have the right to reject or reject private goods because they have multiple
alternatives and the right to choose the product based on their preferences. Consumer
preferences are revealed through effective demand and market price(Pindyck &
Rubinfield,2009). These revealed preferences are signals for the procedures to proceed with
the goods that the individual desires. Therefore, individuals have the choice of either
choosing to buy a Proton brand car or another brand. The selection depends on the needs of
consumers and the supply from the market. To ensure that Proton brand cars are not set aside
and rejected, Proton strives to produce various capital and features to attract the attention and
interest of consumers. so that consumers will always choose Proton as their car of choice.

4.4 Traded in Free Market

This characteristic means that the goods can be purchased freely on the free market at a
set price. A wide selection of cars can be obtained with various car brands, including Proton.
As a result, to ensure that Proton is always the consumer's first choice, the company has

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diversified the models of the car. Proton vehicles are currently sold in at least 15 countries,
the vast majority of which are in Asia; the United Kingdom is the company's largest export
market. Proton is also expanding into five new markets: Kenya, Pakistan, Brunei,
Bangladesh, and Egypt. Furthermore, Proton stated that virtual product launches for the
current Proton Saga will take place in Bangladesh and Egypt(Editoron,2020). As a result, the
Proton brand has spread throughout the free market to be easily accessible to consumers.

4.5 Opportunity Cost

These goods have an opportunity, that is the consumer must forego the benefit of a
similar product when choosing a specific private commodity. Opportunity cost refers to the
value of other options that are sacrificed when choosing a more suitable alternative. It is also
called "alternative cost"(Spencer & Amos,1995). There are limited resources or limited
spending capacity. Therefore, to prevent consumers from missing out on the opportunity cost
of choosing Proton brand cars, various new and latest capital designs are available according
to current needs and competitive price comparisons. Among them are the best-selling
products such as the Proton X70 and X50, which give a special taste to consumers to enjoy.

5.0 DIFFERENCE BETWEEN PRIVATE GOODS AND PUBLIC GOODS

As the name implies, public goods are provided for the convenience and welfare of the
general public at no cost. Private goods, on the other hand, are those that are sold by private
companies in order to make a profit while also meeting the needs of the buyers. There is a
significant distinction between the two types of goods. However, both public and private
goods are for the benefit of the consumer; they are vastly different from one another. I have
put the key points in the table below and I will explain in detail the differences in my next
section.
BASIS PUBLIC GOODS PRIVATE GOODS
RIVALRY They are non-Rival They are Rival
EXCLUDABILITY They are non-Excludable They are Excludable

FREE RIDERS’ there is a problem with free there is no problem with free riding.
PROBLEM riding.
DEMAND CURVE The mode of vertical addition The mode of horizontal addition

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5.1 Rivalry – Public Goods verse Private Goods

Public goods are non-rival, which means that after consuming public goods, the
benefits derived by one person do not reduce the benefits of others. To put it in other words,
public goods are non-competitive in the sense that they can serve many people at the same
time without interfering with one another's use(Case & Fair, 2007). A streetlight is an
example of a non-rivalrous good. All societies or individuals regardless of race or social
status can use street lights found on the road or even in residential areas and intersections
without having to compete. Private products involve rivalry or competition among
consumers for their use because the consumption of one person limits the use of another.
Consumption rivalry exists for items such as a car. If someone purchases a car, it is no
longer available for others to consume. Because these goods can only be used or occupied by
one person, competition for their consumption is created. As a result, consumers become
competitors in their pursuit of them(Browning & Zupan, 2005).

5.2 Excludability – Public Goods verse Private Goods

Public goods are non-excludable because these items are usually provided at no cost and
can be used by anyone without any restriction. For example, it is nearly impossible to
prevent people from using streetlamps at night. It is also impossible to collect payment from
everyone who uses it. Furthermore, streetlights are non-competitive. A single person
standing under a streetlight does not prevent others passing by from benefiting from the light.
Private goods are excludable because they are expensive, and non-payers are not permitted
to consume them. For example, many people wish to own a luxury or a supercar, but not
everyone makes the effort. A person may wish to own a BMW as a dream car, but only those
who are financially stable or able to meet the bank loan requirements, or those who come
from wealthy families, may be able to pay cash for their dream car, the BMW.

5.3 Free Riders’ Problem- Public Goods verse Private Goods

Since Public Goods are non-excludable everyone has the excess to them, as a result, we
have what is known as the "free-rider problem," in which people benefit from a good
without contributing to its payment as mentioned in 4.2 one of the examples is streetlight,

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that everyone is able to use without paying for it. The free-rider problem arises from the
fact that if some people do not pay, the rest will be hesitant to pay as well. As a result, a
private firm would produce fewer of such goods, resulting in a less-than-ideal supply to
society. As a result, the solution would be for the government to fund it through general
taxation. The initial and subsequent costs of public goods are typically borne by the
taxpayer. As a result, the taxpayer bears the cost, while others benefit without having to pay
for it. The free-rider problem is regarded as a market failure because people benefit but do
not pay for the good. As a result, public goods may be overutilized. For private goods,
individuals must pay compensation for the good in a private market set up in order to enjoy
its benefits, as I mentioned in 4,2 one for the example is car. This eliminates the free-rider
problem because competitiveness, which obstructs simultaneous consumption, prevents easy
access to the good. A private good is a “scarce economic resource”, resulting in competition
for it(Guess,2019).

5.5 Demand Curve -Public Goods verse Private Goods

To determine the optimal quantity of a public good, the demand for it must first be
determined. Price-quantity schedules are used to represent the demand curve for public
goods, and they show how much someone is willing to pay for an extra unit of each possible
quantity. Individual demand curves for public goods are summed vertically, for example,
streetlights can serve more than one person, and one person's consumption does not reduce
the consumption of another. If two market participants are both willing to pay $20 for a light,
the willingness-to-pay for the first streetlights is $40. Individual one is only willing to pay
$10 for the second streetlights, while Individual two is only willing to pay $5. We can derive
the collective willingness to pay by vertically summing each individual's willingness to pay,
which is similar in concept to the demand curve. If the marginal cost of providing a
streetlight was $30, one streetlight would be the socially optimal number.

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Figure 8.0:- Demand Curve for Public Goods

Source : https://courses.byui.edu/econ_150/econ_150_old_site/lesson_11.htm

So in that case it is worth noting that, due to the free-rider issue, no single person would be
willing to provide a streetlight because the marginal cost exceeds her willingness to pay. To
address this market failure, the government will typically tax individuals while also providing
goods or services to the public.

For private goods it is as opposed to horizontally in the market demand curve .Private
goods are competitive, exclusive, and divisible. By "rival," we mean that one person's
consumption of a good or service prevents another person from consuming the item.
Excludable means that those who do not pay for a good or service are unable to consume it.
Finally, private goods are divisible, which means that the cost of producing the good or
service can be divided among those who consume it. For example, if a BMW company
manufactures 100 cars, each one can be divided and sold to a customer. We horizontally
summed the demand curves of each individual to determine market demand for the good or
service. For example, at five dollars, one person would buy five units and another would buy
two, indicating that market demand is high(Economics tuition,2021).

Figure 9.0:- Private Good demand curve

Source - https://courses.byui.edu/econ_150/econ_150_old_site/lesson_11.htm

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6.0 SUMMARY
This task is to access the knowledge of the characteristics' private goods and apply them
in the real world. There are four types of economic goods, namely public goods, private
goods, common resources, and monopoly goods, where each characteristic feature of these
goods affects economic activity. The private goods that are discussed are the Proton brand
cars. The main characteristics of these goods are rivalry and excludability. The other
characteristics that can be attributed to Proton cars are that they are rejectable, traded in the
free market, and have an opportunity cost. In conclusion, the difference between public goods
and private goods shows how important both goods are to addressing the needs of the people.

(Number of words:3572)

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APPENDIX

7.0 Reference

Allen, W. B., Doherty, N. A., Weigelt, K., & Mansfield, E. (2012). Managerial economics:

Theory, applications, and cases. W. W. Norton.

Browning, E. K., & Zupan, M. A. (2005). Microeconomics theory and applications (9th ed.).

New York: Harper Collins.

Case, K. E., & Fair, R. C. (2007). Principles of economic (8th ed.). New Jersey: Prentice

Hall.

Economics tuition. (2021, February 4). Economics Cafe | A Place Where Economics Comes

Alive. https://www.economicscafe.com.sg/discussion-on-public-goods/

Editoron. (2020, December 12). Proton grows export market share in five countries for

December. Borneo Post Online. https://www.theborneopost.com/2020/12/12/proton-

grows-export-market-share-in-five-countries-for-december

Frank, R. H. (2005). Microeconomic and behavior (6th ed.). New York: McGraw-Hill.

Guess, R. (2009). Public goods, Private goods. New Jersey: Princeton University Press.

https://doi.org/10.1515/9781400824823

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Hui, K. L., & Png, I. P. (2005). The Economics of Privacy. Forthcoming in Terry

Hendershott, Editor, Handbook of Information Systems and Economics, Elsevier.

Mansfield, E. (1987). Managerial economics and operations research: Theory, applications,

and cases.

McEachern, W. A. (2005). Economics: A contemporary introduction. Cengage Learning.

Meyer, A. (2010). public goods, private goods: the merging in global space. Dorrance

Publishing.

McConnell, C. R., & Bruce, S. L. (1999). Economic: Principal, problems and policies

(14th ed.). Boston: McGraw-Hill.

Munzarina Ahmad Samidi, Norehan Abdullah, Jamal Ali, & Zalina Mohd Mohaideen.

(2021). Principles Of Microeconomics (4th ed.). Open University Malaysia.

Proton holdings. (2003, January 23). Wikipedia, the free encyclopedia. Retrieved March 7,

2022, from https://en.wikipedia.org/wiki/Proton_Holdings

Pindyck, R. S., & Rubinfield, D. L. (2009). Microeconomics (7th ed.). New Jersey: Prentice-

Hall.

Spencer, M. H., & Amos, O. M. (1995). Contemporary microeconomics (10th ed.). New

York: Worth.

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The Four Different Types of Goods. (2019, January 3). ThoughtCo.

https://www.thoughtco.com/excludability-and-rivalry-in-consumption

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