Chapter 10

Question 0

The polluter pays principle

Answer 0

The price of a product that pollutes should reflect both the private costs of production and the external costs - I.e. The full social cost. This happens when external costs can be internalised. Changing laws and regulations can often bring this about.

Question 1

Incentive

Answer 1

Any factor that enabled or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives.

Question 2

Taxation

Answer 2

One way to provide an incentive to change behaviour. The imposition of a tax on certain goods and services will increase the price and reduce consumption. But its impact will depend on the price elasticity of demand for the product..