Real world examples

Negative externality in production tax

The UK climate change levy 2001 (tax on energy use by buisnesses)

Case study negative externality in production

Volkswagen defeat device 40x nitrogen oxide than allowed

Negative externality in consumption - government intervention

VAT + tobacco duty around 80% of the cost of the pack

raises 8B per year

Negative externality in consumption - impact

smoking related illnesses costs the NHS almost 2B per year

Positive externality in consumption

Healthcare - NHS england vaccination programme

Public good

National defence

Information failure, provision of information

requirement for graphic images and health warnings on packets

Indirect tax

Sugar 18p per litre for drinks with 5-8g or sugar per 100ml

fuel duty 57p per litre

Subsidy

CfD - subsidy paid to producers using renewable energy

Evaluation of subsidy

EV still pollute, batteries require mining of lithium

Maximum price

UK energy price cap set by Ofgem

Minimum price

Alcohol in Scotland 50p per litre

Perfect competition

agriculture

Monopolistic competition

hairdressers

Collusion in monopolies

British airways and other airlines fined millions for colluding on air cargo fuel surcharges

Price wars in monopolies

2010 price war Ryan air and easy jet led to prices as low as 10 pounds

5 firm ratio oligopoly

avation industry 62.5%

Natural monopoly + regulation

Thames water - Ofwat regulates through price caps and service quality standards

Trade union

NEU teachers - demonstrates bargaining power and ability to influence wages above equilibrium

Gender pay gap

12.8%

Public sector pay gap

Public sector 7% more than private

Privatization

Royal mail 2013

Nationalization

BoE 1946