Ecological Economics Week 8 Tiago Domingos Assistant Professor Environment and Energy Section Department of Mechanical Engineering Doctoral Program and Advanced Degree in Sustainable Energy Systems Doctoral Program in Mechanical Engineering

Economic Growth Source:

Economic Growth Source:

Market Equilibrium to Social Optimum Pigou taxes –We have a negative externality which we want to internalise. A tax shifts the marginal private cost curve up by the amount of the tax. Faced with this cost increase, the producers have an incentive to reduce output to the socially optimum level by reducing the marginal externality to the marginal tax. Social optimum Market equilibrium Pigou tax

Market Equilibrium to Social Optimum In a more generic way...