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06.03 How do Externalities Affect You?

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Nicole Kerr

on 4 August 2016

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Transcript of 06.03 How do Externalities Affect You?

06.03 How do Externalities Affect You?
Guided Questions
1. Give three possible solutions to the economic issue you are investigating.
1. Place trash cans in areas where litter is more prevalent
2. Enforce litter laws and/or have more punishment
3. Give tax deductions
2. Why would some people oppose the solutions you have chosen?
Some may oppose my solutions because they do not realize how big of an issue littering is.
1. What positive or negative externalities does this issue present at each sector of the economy? Refer to your circular-flow diagram.
- negative - more money would be spent on litter laws and cleaning up
- positive - neighborhoods would be much cleaner
- positive - area would be much cleaner, attracting more customers
Rest of the world
- positive - the world as a whole would be much cleaner, less animals getting sick and dying due to litter
2. What incentives do individuals, businesses, and government have to act on each possible solution?
- People can pick up litter, take it to a recycling facility, and receive tax deductions
- Businesses can start programs where customers bring in recyclables, and they can receive a gift certificate or other goods
- The government could offer small donations to businesses and communities who keep the streets clean
3. What are the externalities, both positive, and negative, that could result from each possible solution?
Place more trash cans
- positive - Placing trash cans would encourage people to throw away their trash rather than throwing it on the ground. Negative - It costs more money to place trash cans than to not have any
Enforce litter laws
- positive - People will become more aware of their actions knowing that there are consequences. Negative - Government would have to pay more
Tax deductions
- positive - This would motivate people to recycle knowing they would get something in return. Negative - The government would recieve less in taxes
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