Wednesday, February 18, 2009

Unit 1: Packaging: A case for internalising the externality?

The BBC reports that campaigners are suggesting that supermarkets should pay for the cost of disposing of the packaging on their products

http://news.bbc.co.uk/1/hi/business/7893403.stm

a) How is excessive packaging an example of market failure?
b) How would this proposal be an example of internalising the externality and making the polluter pay?
c) Using a S&D diagram discuss the extent to which such a policy would reduce the market failure

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