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 …
A list of different types of economic goods. Income elasticity of demand and types of goods Income elasticity of demand (YED) measures the responsiveness of demand to a change in income. Normal good A normal good means an increase in income causes an increase in demand. It has a positive income elasticity of demand YED. …
A specific tax is a fixed amount of tax placed on a particular good. It is also referred to as a per-unit tax, and the tax will depend on the quantity sold (not price). Examples of specific taxes A tax of £0.40 on 500 ml sugary drinks. A tax of £3.92 per 20 pack of …
Evaluation is an important component of an advanced essay. It requires the ability to look at facts, arguments and analysis, with a degree of critical distance. Evaluation involves: Looking at what other factors may affect the outcome. Time lags involved. How it might depend on other issues, e.g. elasticity of demand Why the original statement …
Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. The price elasticity of supply (PES) is measured by % change in Q.S divided by % change in price. If the price of a cappuccino increases by 10%, and the supply increases by 20%. We say the PES is 2.0. …
A look at the economic impact of a fall in the exchange rate (termed depreciation or devaluation) A fall in the exchange rate is known as a depreciation in the exchange rate (or devaluation in a fixed exchange rate system). It means the currency is worth less compared to other countries. When there is a …
Taxes on negative externalities are intended to make consumers/producers pay the full social cost of the good. This reduces consumption and creates a more socially efficient outcome. If a good has a negative externality, without a tax, there will be over-consumption (Q1 where D=S) because people ignore the external costs. 1. Diagram – Taxes on …
Definition – Price discrimination involves charging a different price to different groups of people for the same good. For example – student discounts, off peak fares cheaper than peak fares. Different Types of Price Discrimination 1. First Degree Price Discrimination This involves charging consumers the maximum price that they are willing to pay. There will …