Answer to Question #131303 in Microeconomics for Zain

Question

Review and discuss the quoted example in the book

• Discuss the nature of regulation and corrective tax that was imposed to rectify the act of polluting environment by the firms

Answer 1

Environmental challenges led to an increase in pressure on governments to discover ways to decrease the damage to the environment while minimizing damage to economic growth. This led to governments introducing regulations, innovative policies, and environmental taxes.

Environmental taxes and regulations help ensure environmental effectiveness, economic efficiency, the ability to raise public revenue and encourage transparency. They are also used to address issues such as waste disposal, air emissions and water pollutions. These taxes and regulations can directly address the failure of markets to take environmental consequences into account by incorporating these impacts into prices. This environmental pricing through taxation leaves consumers and businesses the flexibility to determine how best to minimize their environmental imprint.