Making the customer aware of the harmful effects of the product will make them want to consume less.
This is particularly relevant for Information Asymmetry.
By restricting where the good is available to use, or restricting the advertising for the good, demand for the product will shift left and fewer people will use the good.
-Non-rivalrous: one ship using it doesn't prevent other ships from using it.
-Non-excludable: it's not possible to stop ships at sea from seeing the light.
Tax on a product will shift Supply UP.
When demand is inelastic, this does not change the quantity significantly.
Consumers pay a high proportion of the new tax revenue (blue area).
If the good is primarily consumed by low-income groups, the tax will be regressive.
Goods which are over-consumed because consumers do not take into account the costs these goods may have on themselves and on society.
The excess supply (or ‘glut’) that results is wasteful (e.g. Thai government’s spending on the ‘rice mountain’)
Mandating usage permits effectively makes a common good excludable (you can't use it if you don't have a permit).
This will mean that the usage can be limited to the point where it is not over-used and the tragedy of the commons is avoided.
-Users will use the common good because it gives them individual benefit.
-By using the common good, the common good is depleted (costs are paid by all).
-Eventually the common good is fully depleted and not usable by anybody.
Pmin is higher than equilibrium price.
This means there is Excess Supply at Pmin, causing a 'glut'.
Qs products are produced, but only Qd products are purchased by consumers.
Any of the following:
-Government Inefficiency (Distorted price signals, Lack of Incentives, Political Interference, Inadequate Information)
-Unintended consequences
-Moral Hazard
-Regulatory Capture
