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externality - Coggle Diagram
externality
externality: when the production or consumption of a good or service has an beneficial/harmful effect on a third party.
NEP: MSC >MPC
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legislation to increase production cost: (+) this can reduce pollution by regulations that they need to comply (-) cost of implmenet but tax revenue can help (-) may lead to unemployment
tradable permit: re permits issued by the government that give firms the licence to create pollution up to a certain level (-) paying for the cost, not stopping (+) money (-) dificult set appro limit
PEP: MSC <MPC
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direct provision: (-) same oppo cost, (-)dissuade private investmnet
NEC: MSB < MPB
Ban or regulate the good (+) most direct (-) employment, no revenue, cost, no popular
Impose an indirect tax on the good: + reduce consumption with increased cost, use revenue to correct externality, inelastic products not decrease, illegal means
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market failure: market failing to allocate resources efficiently because too much or too little of a good or service is produced or consumed from the society's point of view.
public good: non-rivalrous (x reduce one's availability) and non-excludable (x exclude one from using again once provided) ==> free rider (no one willing to pay hoping that someone would pay)
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