Core-012 Negative Externality and Taxes
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About Core-012 Negative Externality and Taxes
About the Teacher
Jay Moulton
Jay Moulton is a business veteran. In short:
- Corporate finance and turnaround expert in U.S. and Canada
- CEO or operator of numerous companies in many industries
- 30 years of actually applying business economics principles
- Successfully led and invested in several leveraged buyouts
- Director or advisor to 30+ different companies
- Experience in both for-profit and not-for-profit sectors
- Producer of 700 professional videos and several TV shows
- Author of six economics and business strategy books
- Graduate of Harvard Business School MBA program
- Graduate of The Royal Military College of Canada
- Professional electrical engineer
- Governor of the Harvard Club of British Columbia
Negative Externality and Taxes
MODULE 1
A negative externality is a market action that imposes a negative side effect on a third-party. Pollution is an example of a negative externality. Applying a tax to the polluting firm can remedy a negative externality, giving the polluting firm an incentive to reduce output and the level of pollution.
Negative Externality
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Learning Objectives - Negative Externality
The video explains negative externality as the harmful consequence of production by one party on another, where the impact is external to the production decision of the damaging party.
Taxes
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Learning Objectives - Taxes
Buyers respond to prices including tax because that is the full price the buyers pay. Sellers respond to prices excluding tax because the net price is the price that sellers receive when they sell a taxed good.
When a good that has a perfectly inelastic demand curve is taxed, the buyers pay the full effect of the tax.
When a good that has a perfectly elastic demand curve is taxed, the suppliers pay the full effect of the tax.
When a good that has a perfectly elastic supply curve is taxed, the buyers pay the full effect of the tax.
When a good that has a perfectly inelastic supply curve is taxed, the suppliers pay the full effect of the tax.
Some taxes will have an affect on both buyers and sellers in a market. In this case, the equilibrium price will drop. The amount that it drops depends on how the tax affects both the buyers and the sellers.
Learning Objectives - Taxes
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