ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A Pigovian tax is intended to tax the producer of goods or services that create adverse side effects for society. Economists argue that the costs of these negative externalities, such as environmental pollution, are borne by society rather than the producer.

Detailed explanation-2: -Effect of a Pigouvian Tax The implementation of a carbon tax will raise the price of electricity and reduce the demand, in effect both reducing pollution and generating government revenue for investment in new technologies and energy alternatives.

Detailed explanation-3: -A Pigouvian tax is a per-unit tax on a good, thereby generating negative externalities equal to the marginal externality at the socially efficient quantity. Imposition of a Pigouvian tax leads to a competitive equilibrium, taking account of the tax, which is efficient.

Detailed explanation-4: -A pigouvian subsidy is a subsidy that is used to encourage behaviour that have positive effects on others who are not involved or society at large. Behaviors or actions that are a benefit to others who are not involved in the transaction are called positive externalities.

Detailed explanation-5: -Pigou, is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly involved in the transaction. Examples include tobacco taxes, sugar taxes, and carbon taxes.