The free-rider problem
When a good is free to use once provided, people can enjoy it without paying. This removes any incentive for private firms to supply it, so the market fails completely.
Real World
The UK's nuclear deterrent costs billions but every citizen benefits from the security it provides, whether they pay tax or not — private firms would never fund it voluntarily.
Exam Focus
Always trace the free-rider problem to market failure: no profit motive → no private supply → under-provision requiring government intervention.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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