Using supply and demand curves for fossil fuels, show how economists would explain and attempt to...

Using supply and demand curves for fossil fuels, show how economists would explain and attempt to solve the problem of climate change

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Expert Solution

The economist would solve the problem of climate change with the help of supply and demand of fossil fuels with the help of marginal cost and marginal damage.

In below figure we can see that initially the equilibrium is at e where marginal cost is equal to marginal damage but when the government introduce some Texes then the the private sector would reduce the use of fossil fuels and the marginal damage curve would shift leftwards to MD2.

and the new equilibrium would be realised at even with the reduced quantity of fossil fuels.

in this case say that taxes plays an important role to reduce the use of fossil fuels at the same time we can also say that the model suassion would also play a key role to reduce the amount of fossil fuels.

In moral suassion the govt will morally preach to public that we should reduce the amount of fossil fuels that we use otherwise it won't be left for future generation.

Rahul Sunny answered 1 year ago

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