Question

The written report requires you to perform a microeconomic analysis of an appropriate economic phenomenon from one of the two economic phenomena provided below. Choose one phenomenon. For your chosen phenomenon, conduct an economic analysis bearing in mind the purpose and remit of this course.

An introduction should typically outline the phenomenon you have chosen and highlight its significance. You may present some data to illustrate the phenomenon. Good economic analysis entails identifying (1) the various aspects of the exchange process (the market, the agents involved, the equilibrium outcome), (2) the factors that can affect market outcomes over time and (3) the welfare implications of the exchange outcome and whether there is scope for government intervention. Use graphs, formulae and diagrams where they help your explanations (more rigorous and succinct) compared to words alone. A good conclusion section will provide a look at the big picture, the significance of your findings in a larger context, and even suggest limitations of the models that you have used. Remember this is an economics assignment and therefore you should refrain from writing a report that is general and/or journalistic in nature.

Phenomenon of choice;

2) Green-House Gas Emissions and Climate Change:

The issue of green-house gas emissions and climate change has received a lot of media attention over the last decade. While some countries have taken steps to tackle this issue, others have chosen not to respond. Perform an economic analysis of this phenomenon and its welfare implications. Include in your answer the scope of government intervention in tackling this issue.

Answer 1

ANSWER-

Introduction

Greenhouse Gas (GHG) Emission and climate change have been receiving the attention of policymakers across the world. There is mounting evidence that these GHG emissions and the associated economic costs from climate change could be severe.Greenhouse gas emissions are environmental externalities, and the policymakers have tried to internalize these external costs. The policymakers across the world have tried to address the future climate change by placing a cost on the carbon dioxide emissions, which will further make fossil-fuel based energy consumption more expensive.

However, this price has led to the dual concern by policymakers that:

(a) increased energy costs will not only make industries that rely on these energy inputs less competitive

(b) make consumers of industry products worse off due to higher output prices

In the context of these dual concerns, it might be relevant to see how these government interventions and regulations will have an impact on consumers and producers, and more importantly on their welfare.

The image below shows the consumer and producer welfare effects in perfectly competitive markets.