Tax on a product will shift Supply UP.
When demand is inelastic, this does not change the quantity significantly.
Consumers pay a high proportion of the new tax revenue (blue area).
If the good is primarily consumed by low-income groups, the tax will be regressive.
One person consuming the good does not stop another person consuming it.
A good which is:
-Non-rivalrous
-Non-excludable
-Adverse weather makes the good scarce (shift left)
-Favourable weather makes the good plentiful (shift right)
-A monopoly producer decides to put more on the market (e.g. Saudi Arabia)
Market failure occurs where the price mechanism fails to allocate scarce resources efficiently (allocatively efficiently) or when the operation of market forces leads to a net social welfare loss.
Price Volatility refers to the price of a product changing rapidly and unexpectedly in a short period of time.
A per-unit tax is paid per unit of production/sale.
Benefit . . . Cost
Mandating usage permits effectively makes a common good excludable (you can't use it if you don't have a permit).
This will mean that the usage can be limited to the point where it is not over-used and the tragedy of the commons is avoided.
