Do people respond to market incentives? Consider the following policies. How do

Question

Do people respond to market incentives? Consider the following policies. How do you expect people to respond to them? What environmental impacts might arise? (25 pts) Many places require that "brownfields" - places that previously received contamination, usually from industrial use - be cleaned up before they can be put to new uses. Brownfields are commonly in urban areas. Suburban and rural areas are sometimes known as "greenfields" because they lack contamination concerns. Where would new businesses want to locate? (12 pts) a.

Explanation / Answer

Incentives refer to something that induces a person to act accordingly . People take decisions by comparing cost and benefit , so they always respond to incentives .

The location of new business depends upon market factors . Some business must be located in urban areas so as to be close to market for raw materials and to sell finished goods . In such cases the cost and benefits are measured . If the benefits of locating in an urban area exceed the cost of cleaning up brownfields then industries do clean up before setting up their unit and set up in urban areas . While if the cost of cleaning is much higher then rural or suburban areas are targetted to cut down on cleaning costs .

People respond as per market incentives of maximizing profits . Here environment is impacted in a negative way if new business decide to locate in greenfields and not clean up the contaminated ones .

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