1) Give an example of a cap-and-trade system other than the California example d
ID: 1162539 • Letter: 1
Question
1) Give an example of a cap-and-trade system other than the California example discussed in class. You may use Google. A simple, one-sentence description of the system will suffice 2) Show that, if everybody has the same time endowment and wage rate, and if all consumption goods including leisure can be taxed at the same ad valorem rate, that a 3) When taxes are implemented under the Ramsey rule, the percentage decrease in quantities of all goods will be the same. Using this fact, show that the relative tax rates are inversely proportional to their elasticities.Explanation / Answer
The word cap means cap. on green house emmissions alimit of emmision of gasses/limit on pollution is sancioned to aindustry if the emmission exeeds the companies have to pay penalties.the trade factor is that to buy or sell allowances that permit them to purchase or sell that permit. these companies give big incentives for cutting emissions volume.
3) The Ramsey rule - states " THE OPTIMAL TAXES CAUSE EVERY GOOD TO HAVE THE SAME PROPOTIONAL REDUCTION IN COMPENSATED DEMAND". this can be shown by aformula of price elasticity demand.
PED= % change in Q.D/% change in price. simply to say if the price increases by 10% & the demand for the goods fell to20% then PED= -20/10 =-2.0
2) Ad valorem tax means the tax imposed on the value of the item being taxed mostly these taxes are leived on property,. the real estate property holders yearly asses the current value of the property & have topay the taxes . wecannot use lump-sump taxes for instance
Pc : price consumer pays.
Ps : price the producer recive so Pc=Ps+t OR Ps=Pc-t formula for per unit tax,
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