Before doing this homework, read this article, as well as this article. Then wat

Question

Before doing this homework, read this article, as well as this article. Then watch this video, and this video.

https://enviroliteracy.org/environment-society/economics/externalities/

http://blog.mlive.com/green-blawg/2009/07/environmental_law_internalizin.html

https://www.youtube.com/watch?v=gjI5EZKzwI4

https://www.youtube.com/watch?v=6RhYY_4Wzls

Imagine that we were to use policy to internalize all the external costs of gasoline (pollution, health risks, climate change, impacts from oil drilling and transport, etc.) and that as a result, gas prices rise to $13 per gallon. What effects do you think this would have on the choices we make as consumers (such as driving behavior and types of vehicles purchased)? What influence might it have on the types of vehicles produced and the types of energy sources developed? In the long run, do you think that internalizing external costs in this way would end up costing society more money or saving society money?

externalities: costs borne by society that are not included in the price

Explanation / Answer

Ans) If we were to internalize all the external costs of gasoline and as a result gas price rises to $13 per gallon . What effects do you think this would have on the choices we make as consumers ?

As stated in the article, every action of human beings involve a cost. Externalities are side effects of an activity affecting people which are not involved directly in the activity. It is a type of market failure .It can be of two types :

Positive Externality is the unpaid benefit which extends to those not involved directly in the activity . These group of individuals who benefit without contributing are termed as '' Free Riders''.

Negative Externality has serious implications as it can be harmful to the public or the environment. One solution provided by the economists is to include the cost of negative externalities in the price which means process of internalising externalities. Thus , externality should not be regarded as market failure and call for governmental intervention rather, externalities such as pollution , free rider problems and so on can be easily internalised and can be dealt with. Here , in this question the negative after effects of gasoline is internalised and as a result the cost of gasoline per gallon rises to $ 13. This will have positive effect on the consumers as every human being have to pay equally for their activities. There will be no free riders in this case. There will be positive effect on the driving behaviour and vehicles purchased.

What influence it might have on types of vehicles produced and energy sources developed?

The polluter which can be manufacturer or consumer, no doubt avoids to pay pollution tax or cost involved separately. However, with internalising the externality in the total cost is the suitable policy alternative to check for negative externalities like pollution which is detrimental to both humans and environment. So, it would have positive effect on the vehicles produced and energy sources developed.

In the long run, when all the individuals start paying the actual or true costs of their activities, it is certain that in the end there will be saving in the society with a healthy and clean and fresh environment to live in. We all should endeavour and work together as a community for a healthy society. Appropriate and suitable policies should be made to combat the effects of both negative and positive externalities.

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.