Catalytic converters help reduce pollution and therefore have positive externalities. This means that if consumers use them there will be benefits to a third party, because there will be less pollution and health problems. In a free market there may be under provision of catalytic converters, for various reasons. Firstly, because there are positive externalities …
Readers Question: Discuss the case for and against relying on the market mechanism to produce clean alternatives sources of energy that can replace fossil fuels such as oil and coal. (15) Fossil fuels are non-renewable resources. Therefore, as they run out, the price will rise. This will create an incentive for firms to look for …
Readers Question: over the next 10 years, should the government make greater or lesser use of measures such as road pricing or taxes on fuel to reduce road use? In the UK, road use creates many external costs. This includes increased pollution, congestion, and accidents. Therefore, the social cost of driving is greater than the …