As we move forward into the future our change in society allow us to believe we want more material consumption, as we increase are consumption, which the majority are non renewable goods and the environment can only absorb so much pollution before it becomes dangerous and according to figure 1.1
The market mechanism aim is to minimize the extent after point w1 to achieve the government's choice of a social efficiency market.
The market mechanism of extending private property rights by this we mean according to (Coase theorem) would have the effect of a socially efficient level of output being applied, shown by diagram 1.2.
From the diagram we can establish that if the output is less than the point Q3, the marginal profit for the polluter will be greater than the marginal cost to the sufferer. What the sufferer can do is impose a charge on the polluter only if the charge is greater than the marginal cost but less than the marginal profit. This market mechanism will benefit both sides but only to the equilibrium of Q3, anything greater will exceed the marginal cost to the marginal...