Syllabus: Pearson - AS Level Economics
Module: 1.3 Market Failure
Lesson: 1.3.3 Public Goods

Introduction

Public goods sit at the heart of understanding market failure, and this topic gives students a clear insight into one of the most foundational gaps in market allocation. Part of Theme 1: Introduction to Markets and Market Failure in the Pearson Edexcel AS Level Economics A specification, section 1.3.3 builds on students’ earlier understanding of how markets function and where they break down.

This lesson is about deepening economic reasoning: it asks students to think critically about goods and services we all rely on, yet which the market, left alone, often fails to provide. It’s also a chance to embed clear links to real-world policy decisions, citizenship, and public finance, all while sharpening exam-relevant analysis.

Key Concepts

The Pearson Edexcel specification sets out two core objectives for this topic:

• Distinction between public and private goods
  Students should learn the defining features of public goods: non-rivalry (one person’s consumption doesn’t reduce availability to others) and non-excludability (you can’t stop people from using it, even if they don’t pay).

• Understanding the free rider problem
  This occurs when individuals benefit from a good without contributing to its cost, which disincentivises private provision. The classic result? Under-provision or no provision by the market.

Students should be able to:

• Give clear examples of public goods (national defence, street lighting, flood defences).

• Explain why these goods lead to market failure.

• Use diagrams and terminology (e.g. externalities, opportunity cost) to support their arguments.

Real-World Relevance

Public goods aren’t just textbook concepts — they’re embedded in daily life and major global decisions. A few examples to bring this topic alive:

• National Defence: No private firm could feasibly charge citizens for protection from military threat.

• Flood Defences: Coastal and urban flood prevention schemes are crucial in an era of climate change. The Environment Agency in the UK often provides these, funded by taxpayer money.

• Vaccination Programmes: While not pure public goods (they can be excludable), they demonstrate the challenge of free riders and public health protection — especially highlighted during COVID-19.

Framing these as live issues helps students engage beyond abstract definitions.

How It’s Assessed

In Pearson Edexcel AS Economics, public goods typically appear in Paper 1 (Markets and Market Failure). Students may face:

• Short-answer or data response questions: Explain the characteristics of public goods or apply them to a given scenario.

• Longer written responses: Analyse or evaluate government responses to market failure involving public goods.

• Command words to watch:

  • Define: precise definitions of public goods and free rider problem.

  • Explain: e.g. “Explain why the private sector may not provide public goods.”

  • Evaluate: “Assess whether flood defence should be funded solely by the government.”

Expect application to case studies or contexts not directly studied in class — this is where strong real-world examples and confident terminology can boost marks.

Enterprise Skills Integration

This topic might seem far from enterprise, but it actually opens the door to rich skill development:

• Problem-solving: Why won’t the market provide these goods? What options do governments have?

• Critical thinking: What makes something a public good, and where is the line blurred (e.g. roads, healthcare)?

• Decision-making: Weighing up government spending priorities — should more go to street lighting or public transport?

You can build in activities where students role-play local councillors allocating a tight budget, giving them hands-on experience in applying economic logic under pressure.

Careers Links

Understanding public goods links directly to several career pathways and satisfies key Gatsby Benchmarks:

• Public Policy and Government: Economists working in local or national government use these concepts to justify public spending.

• Urban Planning and Infrastructure: Planners must understand externalities and the economic justification for public provision.

• Charity and Non-Profit Work: Organisations working in areas like sanitation or public health often fill gaps left by market failure.

These conversations give students tangible insights into how abstract ideas play out in real jobs — and why these roles matter.

Teaching Notes

Top tips:

• Use concrete examples and challenge students to debate edge cases (e.g. are public parks really non-excludable?).

• Visual aids help — a Venn diagram comparing public, private, quasi-public and merit goods can consolidate understanding.

• Embed this lesson in the wider narrative of market failure and link it back to government intervention mechanisms in section 1.4.

Common pitfalls:

• Students often confuse public goods with goods provided by the public sector.

• “Free rider” is sometimes misunderstood as “people riding for free on a bus” — reinforce the idea that it’s about benefiting without paying, not about actual rides.

Extension activities:

• Ask students to research and present a mini case study on a local example of a public good.

• Set up a simulation: split the class into government, private firms, and consumers. Try to fund and build a flood barrier — watch the market struggle.