What the governement can do about externalities?

?
  • Created by: apple87
  • Created on: 29-11-15 11:38
What is an incentive?
Any factor that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives.
1 of 16
What is the Polluter Pays Principle?
Holds that that the price of a product that pollutes should reflect both the private costs of production and the external costs.
2 of 16
How can the government control externalities?
Legislation, Regulation, Taxation, Subsidies, Tradable permits, Education, Free provision, Advertising
3 of 16
How can legislation control externalities?
Restricts certian activities, changes behaviour, sets standards like pollution levels.
4 of 16
What are the advantages of legislation?
Expected standards are clear, failure to comply has consequenses, the consequences are known.
5 of 16
What are the disadvantages of legislation?
The law can be difficut to enforce, enforcement can be expensive, penalities may not deter behaviour.
6 of 16
What is regulation?
Legal or other rules that apply to organisations. It sets tandards and controls activity.
7 of 16
What sort of regulation can be used?
Quotas, limits eg pollution levels, regulatory bodies
8 of 16
What are the problems with regulation?
Regulatory bodies need to be created and maintained to inspect and prosecute businesses, full monitering an enforcement can be difficult and costly.
9 of 16
What effect does taxation have?
Will increase the price and reduce consumption.
10 of 16
How does tax affect the supply curve?
The supply curve shifts vertically ipwards by the amount of the tax.
11 of 16
How will taxation affect price inelastic products?
Will only see a slight fall in demand
12 of 16
How does tax effect an elastic product?
There will be a substantial fall in the quantity demanded.
13 of 16
What do subsidies do?
Make specific products cheaper and encourages consumption.
14 of 16
What are tradable permits?
When the governmnet issues a restrictedd number of permts equal to the desired level of emissions.
15 of 16
What do trade permits do?
Gives an incentive to reduce emissions, inefficient producers can expand without buying more permits which increases operating costs.
16 of 16

Other cards in this set

Card 2

Front

What is the Polluter Pays Principle?

Back

Holds that that the price of a product that pollutes should reflect both the private costs of production and the external costs.

Card 3

Front

How can the government control externalities?

Back

Preview of the front of card 3

Card 4

Front

How can legislation control externalities?

Back

Preview of the front of card 4

Card 5

Front

What are the advantages of legislation?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Business Studies & Economics resources:

See all Business Studies & Economics resources »See all What the government can do about externalities? resources »