ECON 10010 Chapter Notes - Chapter 10: Morality, Normal Good, Pigovian Tax
Document Summary
Difference between the two reflects cost of the pollution emitted: q*: intersection of demand curve and social cost curve, achieving optimal outcome (q*) Tax producers for each amount of product sold. Public policies toward externalities: command-and-control policies: regulation, regulating behavior in response to an externality, environmental regulations: Maximum levels of pollution that a factory may emit: market-based policy 1: corrective taxes and subsidies, purpose: align private incentives with social efficiency, corrective taxes: Tax designed to induce private decision makers to take account of the social costs that arise from a negative externality. Has positive income elasticity: these goods, clean air and clean water, obey the law of demand. Private solutions to externalities: the types of private solutions, externalities can be solved by moral codes and social sanctions, private solutions: The costs that parties incur in the process of agreeing to and following on a bargain.
