If one was trying to answer a question such as "To what extent are tradable pollution permits an effective method of reducing market failure arising from carbon emissions", would I lose marks for using a negative externality diagram to explain how permits internalise external costs arising from pollution, which would result in increased cost of production (causing shift to left in supply), reducing over-production etc.?
***** would you not just draw negative externality diagram and say that pollution permits cause the external cost to be recognised and paid for? Moving curve from MPC to MSC?
Hi ***** , is it the shift to the left of the supply curve in that industry ( due to increase in COP, therefore solving overproduction) or is it the fact that the number of tradable permits are fixed at the socially optimum amount that solve market failure here? Or is it both?
How would you show a change in the diagram where you said costs of production increase, a shift in supply to the left would occur, leading to a fall in quantity and better resource allocation?
You mentioned that we need to shift the supply curve left to show that change, but it would've been much more helpful if you could've quickly drawn it on the diagram because I am now unsure of how to draw the shift, and as you mentioned, I have an essay to write based around this. Thanks though.
Do all firms get the same amount of permits initially? For instance, would a small firm - possibly one which isn't polluting much anyway - get the same amount of permits as a large firm with a large output? Surely then the large firms face a much larger increase in costs than the smaller firms. Love your videos by the way, thank you!
xPSG1 Good question, that depends on the government issuing. Your situation may lead to differing permit levels distributed based on size, in which case fine. Whatever is deemed equitable
Db Rk Yes if the price of a permit is more than the cost of R&D into green technology. Incentives change to then just accepting the fine - huge government failure
Sir please help me, what diagram should i draw for this essay? Should i draw a simple inelastic supply curve or the supply curve shifting to the left. Or both diagrams including in the essay?
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I was so confused with this topic, Thanks man totally helped me out.
could you use this for reducing the level of plastic packaging used as in give permits for using plastic?
Exam is in a day and I'm learning about pollution permits rn. Legit didn't know any of this before fgs.
how did you do lol
If one was trying to answer a question such as "To what extent are tradable pollution permits an effective method of reducing market failure arising from carbon emissions", would I lose marks for using a negative externality diagram to explain how permits internalise external costs arising from pollution, which would result in increased cost of production (causing shift to left in supply), reducing over-production etc.?
***** No this is bang on
***** would you not just draw negative externality diagram and say that pollution permits cause the external cost to be recognised and paid for? Moving curve from MPC to MSC?
What do we shift on a tradeable permits diagram and how would we explain the shift?
Life saver. Thank you!!
Would it be correct to say that this internalises the externality ? Or am I completely incorrect?
really useful, thanks
Hi ***** , is it the shift to the left of the supply curve in that industry ( due to increase in COP, therefore solving overproduction) or is it the fact that the number of tradable permits are fixed at the socially optimum amount that solve market failure here? Or is it both?
this is gold
Thank you so much for this video! Extremely helpful!
How would you show a change in the diagram where you said costs of production increase, a shift in supply to the left would occur, leading to a fall in quantity and better resource allocation?
Really great
Hello, great video! have you got a reference for your point about the US and Kyoto Protocol?
This was very helpful. Thanks so much!
You mentioned that we need to shift the supply curve left to show that change, but it would've been much more helpful if you could've quickly drawn it on the diagram because I am now unsure of how to draw the shift, and as you mentioned, I have an essay to write based around this. Thanks though.
Do all firms get the same amount of permits initially? For instance, would a small firm - possibly one which isn't polluting much anyway - get the same amount of permits as a large firm with a large output? Surely then the large firms face a much larger increase in costs than the smaller firms.
Love your videos by the way, thank you!
xPSG1 Good question, that depends on the government issuing. Your situation may lead to differing permit levels distributed based on size, in which case fine. Whatever is deemed equitable
cheers
very good
Would it be a form of government failure if the cost of the fine for exceeding the pollution permit was less than the cost of undergoing R&D?
Db Rk Yes if the price of a permit is more than the cost of R&D into green technology. Incentives change to then just accepting the fine - huge government failure
thank you sir for the video
well done, thanks!
can't firm Y purchase his own permit instead of purchasing from firm X..
Sir please help me, what diagram should i draw for this essay?
Should i draw a simple inelastic supply curve or the supply curve shifting to the left. Or both diagrams including in the essay?
Hello class
What do we shift on a tradeable permits diagram and how would we explain the shift?