1. Module 10 The Role of Government - Spillover Effects - Thomas Malthus “The Doomsday Prophet” - assignment

2. Spillover Effects Governments play a role in dealing with the external effects of economic activity. Outsiders are affected by the production or consumption of a product Spillover Costs: negative effects of producing or consuming a product to outsiders. Eg. Pollution (air and water) - producers do not take these costs into consideration when pricing their product.

3. Spillover Effects Government must control (eg. Excise tax) the market to ensure spillover costs are not to great. adding these costs to producers’ private costs vertically raises the supply curve

4. Spillover Effects Without government intervention, equilibrium occurs at point b, at a price of $1.50 per litre and a quantity of 6 million litres of gasoline. To account for spillover costs, the government may impose an excise tax of $1.00 per litre. As a result, the supply curve shifts from S0 to S1, moving equilibirum to point a, at a price of $2.00 per litre and a quantity of 5 million litres.

5. Spillover Benefits There is a positive external effect of producing or consuming a product as well. For example, education. Society gains from this service. It enriches the nation’s human resources. It helps Canadians to lead more informed, fulfilled, and productive lives.

6. Public Goods A Public Good is a product whose benefits cannot be restricted to certain individuals Many Canadians pay for the good but some benefit for free. (eg. National Defence, Policing, Lighthouses,etc..) These are financed through compulsory taxation.

7. Thomas Malthus “The Doomsday Prophet” l Thomas Malthus formulated a theory of population based on two principles n food increases in an algebraic progression (1,2,3…) n population increases in a geometric progression (1,2,4…) l He predicted that over time population growth would outstrip growth in the food supply with disastrous effects

8. Thomas Malthus “The Doomsday Prophet” ASSIGNMENT 1. Who was Thomas Malthus? 2. How to the rates of population and food growth differ? 3. How did Malthus predict that population growth would be curtailed? 4. Did Malthus believe in helping those less-fortunate? Explain. 5. What problems or mistakes were there with Malthus’ Theory?