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Economics · 2024 · 6 marks
CBSE 2024 · Region 2 · Set 1 · Q17
Read the following text carefully: Decisions taken by factors of production in the production process often may affect the stakeholders indirectly.…
Read the following text carefully :
Decisions taken by factors of production in the production process often may affect the stakeholders indirectly. Such impacts at times are huge but are not accounted for, while estimating national income. Economists call them as externalities and they can be positive or negative.
In this regard, many economists suggest carbon pricing as an important tool to ensure ecological balance.
Carbon pricing tries to control greenhouse gas emissions by either placing a fee on emitting or offering subsidies on lesser emission. Through instruments like carbon tax, green cess, eco tax, etc. economists suggest moving towards greener technology eliminating such negative externalities.
On the basis of the given text and common understanding, answer the following questions :
(i)
Define externalities.
(ii)
Differentiate between positive and negative externalities.
(iii)
Elaborate how and why carbon pricing should be promoted.
Marking-scheme solution
(i)
Externalities refer to benefits/harms which are caused by one entity to another without being paid/ penalised for it.
(ii)
Positive externalities refer to benefits caused by one entity to another, without being paid for it.
Whereas;
Negative externalities refer to the harms caused by one entity to another, without being penalised for it.
(iii)
Carbon pricing should be promoted by either placing a fee on emitting or offering subsidies on lesser emission. Through instruments like carbon tax, green cess, eco tax, etc. economy moves toward greener technology, eliminating negative externalities. Hence, carbon pricing is an important tool to ensure ecological balance.
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CBSE Class 12 Economics past-paper question from the 2024 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.