A private good is one whose owner is a private person or institution and has the right to enjoy it exclusively.
That is, private goods, in simpler terms, belong to a person or entity that uses them privately.
People have unlimited needs and many of them are satisfied through goods. There are different types of goods, classified by degree of scarcity, functionality, degree of transformation, ease of access or sensitivity to variations in consumer income.
Within the goods classified by ease of access, we find those that we explain in this article, private goods.
Being private property, they cannot be used by anyone, only by those authorized by their owner. These types of goods are the most common, since they are all those that we buy on a day-to-day basis.
Characteristics of private goods
The characteristics that private goods meet are the following:
- Depending on the characteristics of the good, it may be used by one or more people simultaneously. For example, a mobile phone can only be used by one person at a given time, but a house can be inhabited by several people at the same time.
- Its owner has complete freedom to do with the property what he sees fit.
- To have the right of exclusivity over the good, the most normal thing is that you have to pay a price for it.
- They can be sold.
- It cannot be used by just anyone.
Difference between public and private good
The difference between a public good and a private good lies in the possibility that any person has to make use of them. In the case of public goods, they can be used by anyone without any type of restriction.
Generally, these goods are property of the State and the use of them by a citizen does not prevent them from being enjoyed by others. It is also free to use them.
Private property, however, limits its use to its owner or to those authorized by the owner. These assets are the most common, since everyone has some property that is not shared with the entire population. An example of this would be clothing.
So that you better understand the difference, I am going to give you the following example. Imagine that a construction company is going to build a building and, on a part of the land that it owns to do so, it is going to build a park.
If this park is built and they only allow access to the residents of the building who have a key, it will be a private good. However, if this park is not fenced and can be accessed by anyone at any time, it will be a public good.
Example of private goods
Private goods are the most common, here are some examples of them:
- Mountain bike.
- Mobile phone.
- Furniture of a house.
- Office of a company.
- Land to farm on (which has an owner).
- Electric scooter.