The tragedy of the commons
When everyone can freely use a shared resource, each person takes as much as they can. This individually rational behaviour destroys the resource for everyone.
Real World
North Atlantic cod stocks collapsed in the 1990s as fishing fleets from multiple countries maximised their own catch, each ignoring the cumulative damage until the fishery was virtually destroyed.
Exam Focus
Distinguish the tragedy of the commons from the free-rider problem: both involve non-excludability, but the commons involves a rival resource being depleted.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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