Environmental Regulation of Production

This lecture explores different mechanisms for environmental regulation of production, focusing on the impact of quantity caps, consumption caps, and taxes on the market equilibrium. The instructor discusses how these regulations affect the behavior of producers and consumers, leading to changes in prices, quantities, and overall market efficiency. By internalizing external costs through taxes, the lecture highlights the importance of aligning private costs with social costs to achieve optimal outcomes. Various examples, such as the concept of a value-added tax, are used to illustrate the economic principles behind environmental regulation strategies.