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External effects and the government intervenes
Economics
External effects
Excise duty
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Slide 1:
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Economie
Middelbare school
vwo
Leerjaar 3
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Economics
External effects
Excise duty
Slide 1 - Diapositive
External effects
A side-effect of the market (consequence of the supply or demand for which nobody pays)
External effects Aviation:
Noise
Pollution--> CO2 emissions
Effects the health of citizens near the airport (negatively)
Slide 2 - Diapositive
What is a good example of an external effect
A
Fertilisers used by farmers polute ground water
B
Syrup waffle bakers sell leftovers for € 0.25
C
Cinemagoers enjoy the beatifull images of the film
D
A disco offers local residents half-price entry tickets
Slide 3 - Quiz
The government intervenes
Excise duty = tax on products that cause external effects
Alcoholic drinks (diseases/ domestic violence --> health costs)
Sigarettes (diseases --> health costs
Petrol (CO2 emissions, polution)
Slide 4 - Diapositive
The excise tax is the difference between the two supply curves: $ 4
Calculate the change in total consumption of a bottles of rum as a percentage
Slide 5 - Diapositive
The change as a percentage:
(new-old)/old X 100 %
(400 - 500)/500 X 100 % = 20 %. Calculate the total tax revenue
Slide 6 - Diapositive
Calculate the total tax revenue
$ 4 X 400 = $ 1,600
Slide 7 - Diapositive
Government has reached it's goals:
Increase in price of 40 %
Decrease in consumption of 20 %
Tax revenue can be used for treatment and prevention of abuse of alcohol
Slide 8 - Diapositive
Other means of intervention: road tax
People who have cars that are environmentally friendly pay less road tax (electronic cars 0 %)
Owners of cars that are environmentally unfriendly pay more road tax
Slide 9 - Diapositive
Do
Exercise 3 - 8 section 2 or:
som2day -->
economie -->
malmberg link leerling licentie -->
Chapter 6
Section 2
Test je zelf
Slide 10 - Diapositive
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