Apparently the Greeks have discovered that incentives matter. From today’s “All Things Considered” on NPR:
“Another new consequence of Greece’s economic crisis is that the skies of Athens and other cities are filled with smoke due to the increase in the use of wood burning stoves. The cost of heating oil has gone up 40 percent — a tax increase imposed by the troika. The Greek Environment ministry has issued a warning that the increase in pollutants in the air is posing public health risk.”
Economic principles in action here:
- Taxing an activity or product means less will be used.
- Buyers will respond to a tax by looking for substitutes.
- General equilibrium effects can be important.
- Demand curves slope downward.
That’s the end of this week’s lesson.