In this article we will discuss about the multiple theory of public household. Economists have paid much attention to the formulation of theories that examine the problems of consumer households, business firms, trade unions and other decision making units in the economy. However they have not made any serious attempt to develop a corresponding theory of the public economy. The [...]
After reading this article you will learn about the relationship between positive externalities and allocative efficiency. Positive externality occurs whenever private markets fail to allocate resources on the basis of full social benefits. Immunization against communicable disease, external benefits from education at schools are typical examples of positive externalities. Individuals who are external to the market exchange are not required [...]
This article throws light upon the top three policies taken by government that will correct negative externalities. The policies are: 1. Taxation 2. Subsides 3. Regulation. Type # 1. Taxation: Corrective taxation of negative externality, forces market participants to account for the opportunity costs of all resources allocated in private market. Consider the case of a rubber processing industry in [...]