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 [...]
Stabilization Policy: Budgetary policy has its own bearing on the performance of a national economy. That is on targets such as high employment, a reasonable degree of price stability, soundness of foreign accounts and an acceptable rate of economic growth. These macro targets cannot be materialized automatically. But it requires deliberate and well planned policy guidance and packages. In the [...]
1. Private Goods: Private goods are those goods which yield utility only to the person consuming the good. Only the person who drink a cup of tea for example benefit from the consumption of that cup of tea. The cup of tea consumed by one person cannot be consumed by anyone else. Therefore private goods are those goods, the consumption [...]