# Understanding Private Goods: Key Differences From Public Goods

![A car buyer inside a car dealership standing in front of a new vehicle and contemplating the cost.](https://www.investopedia.com/thmb/OeUJP3HJ8gPNQKTsJIjIBVpWN8I=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Whole-LifeCost-e51ac74a1c094e039cc6467644fb679c.jpg)

*— andreswd / Getty Images*

## What Is a Private Good?

A private good is a tangible item whose use by one individual prevents others from using it due to its [rivalrous](https://www.investopedia.com/terms/r/rival_good.asp) and excludable nature. Unlike [public goods](https://www.investopedia.com/terms/p/public-good.asp), which can be accessed by all without limiting another's use, private goods must be purchased, ensuring exclusive consumption by the buyer. Everyday items like restaurant meals and electronics are common examples.

### Key Takeaways

*   Private goods are rivalrous and excludable, meaning consumption by one person prevents another from using it.
*   Examples of private goods include restaurant meals, grocery items, airplane rides, and cellphones.
*   The purchase of private goods compensates producers and grants exclusive consumption rights to the buyer.
*   In contrast, public goods are non-excludable and can be consumed by anyone without affecting another's access.
*   Private goods do not face the free rider problem because they require purchase, unlike public goods.  
    

## How Private Goods Function in the Economy

We encounter private goods every day. Examples include a dinner at a restaurant, a grocery shopping, airplane rides, and cellphones. A private good is any item that one party can use or consume at a time.  Many tangible home goods qualify because only those who have access to them can use them. Items like food and toilet paper, which are used up or destroyed, are also private goods.

Private goods often have limited availability, making them excludable by restricting others' access. For example, only a certain number of a certain pair of designer shoes are produced, so not everyone can have those shoes even if they wish to purchase them. Not only is a single pair seen as a private good, but the entire product line can be classified as such.

The majority of private goods must be purchased for a cost. The cost compensates for the fact that only one person can use the good at a time. Purchasing the item secures the right to consume it and compensates the producer for the costs involved in making it.

## Comparing Private and Public Goods: Key Differences

A private good is the opposite of a public good. Public goods are open for all, and one person's use doesn't prevent another's. They are not excludable, meaning no one can be prevented from using them. Many public goods can be consumed at no cost.

Water fountains in public places would qualify as public goods, since they can be used by anyone and there is no reasonable possibility of it becoming fully used up. Public television received over the air and standard AM or FM local radio also qualify, as any number of people can watch of listen to the broadcast without affecting other people's ability to do so.

Private goods are less likely to experience the [free rider problem](https://www.investopedia.com/terms/f/free_rider_problem.asp) because a private good has to be purchased; it is not readily available for free. A company's goal in producing a private good is to make a profit. Without the incentive created by revenue, a company is unlikely to want to produce the good. Meanwhile, public goods may be subject to the [tragedy of the commons](https://www.investopedia.com/terms/t/tragedy-of-the-commons.asp) problem.

## The Bottom Line

Private goods are essential components of economic consumption, characterized by their rivalrous and excludable nature. Unlike public goods, which are accessible to everyone, private goods must be purchased and are limited to the consumer's possession and use.

This distinction is crucial for understanding economic incentives and market dynamics, as companies produce private goods with the intention of earning a profit. Consumers seeking private goods must be willing to compete, purchase, and use them in a manner that others cannot.

By differentiating between private and public goods, individuals can better appreciate the intricacies of resource allocation and personal consumption choices in everyday economic activities.  

> **Article Sources**
>
> 1.  College of Earth and Mineral Sciences, The Pennsylvania State University. "[GEOG/EME 432: Energy Policy: Public and Private Goods / The Tragedy of the Commons](https://www.e-education.psu.edu/geog432/node/277)."