If my neighbour burns garden waste causing my house to fill with smoke this is an example of ?
Correct answer: D. a consumption externality
- A. a production externality
- B. a second-best solution
- C. transaction costs
- D. a consumption externality
Explanation
Burning garden waste is a household activity that imposes smoke pollution on a neighbour, so it is a negative consumption externality. A production externality would arise from a firm’s production process harming others.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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