A private good is defined in economics as "an item that yields positive benefits to people”[1] that is excludable, i.e. its owners can exercise private property rights, preventing those who have not paid for it from using the good or consuming its benefits;[2] and rivalrous, i.e. consumption by one necessarily prevents that of another. A private good, as an economic resource is scarce, which can cause competition for it.[3]
A private good is the opposite of a public good, as they are almost exclusively made for profit. Hence, the market demand curve for a private good is a horizontal summation of individual demand curves.[4] (See example below)
Unlike public goods, private goods are less likely to have the free rider problem. Assuming a private good is valued positively by everyone, the efficiency of obtaining the good is obstructed by its rivalry, that is simultaneous consumption of a rivalrous good is theoretically impossible; the feasibility of obtaining the good is made difficult by its excludability, that is people have to pay for it to enjoy its benefits.[5]
One of the most common ways of looking at goods in the economy, illustrated in the table below, is by examining the level of competition in obtaining a given good, and the possibility of excluding its consumption; one cannot, for example, prevent another from enjoying a beautiful view, or clean air.[6]
| Excludable | Non-excludable | |
| Rivalrous | Private goods food, clothing, cars, personal electronics |
Common goods (Common-pool resources) fish stocks, timber, coal |
| Non-rivalrous | Club goods cinemas, private parks, satellite television |
Public goods free-to-air television, air, national defense |
Private goods, like most categories of good, obey the law of demand: the price increases when the demand is high but the supply is low. Alternatively, when there is an excess of a product, the price is lowered in order to decrease the surplus and reach a level where the production is more equivalent to the demand.[7]
An example of the private good is bread: bread eaten by a given person cannot be consumed by another (rivalry), and it is easy for a baker to refuse to trade a loaf (exclusive).
To illustrate the horizontal summation characteristic, assume there are only 2 people in this economy and that:
As a result, a new market demand curve can be derived with the following results:
| Price per Loaf of Bread | Loaf of Bread | ||
|---|---|---|---|
| Person A | Person B | Total | |
| $6 | 0 | 0 | 0 |
| $5 | 0 | 1 | 1 |
| $4 | 0 | 2 | 2 |
| $3 | 1 | 3 | 4 |
| $2 | 2 | 4 | 6 |
| $1 | 3 | 5 | 8 |
|
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Private good can also defined as an exclusive production of goods.