How are public goods characterized?

Public goods are characterized as non-excludable and non-rivalrous, which means that they are accessible to all individuals and one person's use of the good does not diminish another person's ability to use it. This is significant because non-excludability ensures that once a public good is provided, it is difficult or impossible to prevent anyone from using it. For example, national defense is a public good; everyone benefits from it regardless of whether they contributed to it.

Non-rivalry indicates that the consumption of the good by one individual does not reduce its availability for others. In the case of public parks or street lighting, one person enjoying the park does not prevent others from doing the same.

These characteristics often lead to market failure since private markets may underproduce these goods due to the inability to charge individuals directly, causing a reliance on government provision or funding through taxes to ensure that they are made available to the public.