A carbon tax aims to make individuals and firms pay the full social cost of carbon pollution. In theory, the tax will reduce pollution and encourage more environmentally friendly alternatives. However, critics argue a tax on carbon will increase costs for business and reduce levels of investment and economic growth. The purpose of a carbon …
Excess consumption of sugar is linked to several health problems, such as obesity, diabetes, and tooth decay. Consumption of sugar imposes costs on individuals (lower life expectancy) and the rest of society (higher health care costs + lower productivity). A tax on sugar would discourage consumption and raise tax revenue to fund improved health care. …
A tax is a charge levied by a government to raise revenue. The main types of taxes include Income tax – a percentage of income. Corporation tax – a percentage of a firm’s profit. Sales tax/VAT – an indirect tax on the sale of goods. Excise duties – taxes on alcohol, tobacco, petrol. Production taxes …
Readers Question: evaluate the economics for and against the uk government further increasing the tax on alcohol in order to reduce its consumption? Alcohol is considered a demerit good. Overconsumption can cause health problems, which involve external costs to the rest of society. Therefore, there is a strong reason to increase tax on alcohol, reduce …
Governments intervene in markets to try and overcome market failure. The government may also seek to improve the distribution of resources (greater equality). The aims of government intervention in markets include Stabilise prices Provide producers/farmers with a minimum income To avoid excessive prices for goods with important social welfare Discourage demerit goods/encourage merit good Forms …
Definition of Market Failure – This occurs when there is an inefficient allocation of resources in a free market. Market failure can occur due to a variety of reasons, such as monopoly (higher prices and less output), negative externalities (over-consumed and costs to third party) and public goods (usually not provided in a free market) …
Pollution permits involve giving firms a legal right to pollute a certain amount e.g. 100 units of Carbon Dioxide per year. If the firm produces less pollution it can sell its pollution permits to other firms. However, if it produces more pollution it has to buy permits from other firms or the government. This creates …
Definition of Positive Externality: This occurs when the consumption or production of a good causes a benefit to a third party. For example: When you consume education you get a private benefit. But there are also benefits to the rest of society. E.g you are able to educate other people and therefore they benefit as …