Readers Question: Is the following concept correct or not – Nobody wants a free good?
Firstly, a free good is a good with zero opportunity cost.
Water is usually a free good in the UK.
Examples of a free good include:
- Water (where supply is abundant)
- Air (where supply is abundant)
- Blackberries growing in the countryside.
If you know what a free good is, the concept is easy to answer. People definitely want free goods, in fact we use them all the time. In a sense, we take quite a few free goods for granted. The air that we breathe is a form of a free good, because if you breathe in Oxygen, it doesn’t diminish the amount available for anyone else.
Rain water is a free good in the UK, in the sense, that there is always plenty of rainwater, and if you took a few buckets of rain water, there would be no opportunity cost to other people in society.
Opportunity cost of filtered water
If we drink filtered tap water that comes from reservoirs. In a sense there is an element of scarcity, if we take too much water, then it may start to reduce the amount of available water for other people. In that case it no longer is a free good because there is an opportunity cost.
In California, they are experiencing a severe draught, which has made water quite a scarce commodity. Because of no rain, water is now limited. If Californians take more water, then there is an opportunity cost. If you go to the Lake District (where it always rains) and take water from a lake, it is essentially a free good because the rain tends to come down quicker than you can drink it.
You can’t sell a free good
One thing we could say is that nobody will be interested in owning free goods. By definition, it will be very hard to sell a good with zero opportunity cost.
To give an extreme example, you couldn’t sell air – because people don’t need to buy it.
You can turn a free good into an economic good.
If you go out into the countryside, you couldn’t sell blackberries because at the moment they are abundant and you can just pick them off the branches of brambles. If you stand by a blackberry bush nobody will buy from you. If there is great abundance, there is no opportunity cost of you taking a few berries – because there will still be abundant supply for others.
However, if you took blackberries into a town, the good is no longer a free good. This is because there is an opportunity cost of travelling into the countryside to collect them. Therefore, if you pick blackberries in countryside and transport to a town – they became an economic good and they will have an economic value.
In the countryside there is no scarcity. In the town there is scarcity.
Similarly, in the Lake District, you can’t sell rainwater, but take it to California (assuming that is practical) and this former good of abundance becomes a scarce good with high value.
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Thanks so much and it helps a lot !! 🙂