Biography
Where was Pigou born?
Ryde, England
What Is a Pigovian Tax?
A Pigovian tax is a tax assessed against private individuals or businesses for engaging in activities that create adverse side effects for society.
What is a subsidy?
A subsidy is a form of financial aid or support extended to an economic sector generally with the aim of promoting economic and social policy.
When did New Welfare Economics emerge.
1930's
What does the Pigou Effect state?
When there is deflation of prices, employment will increase due to an increase in wealth.
Where did he study for college/university?
King's College Cambridge
Give an example of where the Pigovean tax is present.
Answer to be judged.
What is the Pigovean subsidy?
A pigouvian subsidy is a subsidy that is used to encourage behaviour that have positive effects.
(A positive externality)
What was going on in America during the 1930's
Great Depression; Unemployment rates rise
Unemployment rises...
Prices fall
Where did he lecture?
Cambridge
What is the purpose of the Pigovean tax.
The purpose of the Pigovian tax is to redistribute the cost back to the producer or user of the negative externality.
Give an example of the Pigovean subsidy.
The government gives a subsidy to homeowners who buy solar panels for their house to reduce the amount of electricity.
What was going on in England in the 1930's
Unemployment in England had more than doubled from 1 million to 2.5 million.
People can buy more with the same money...
Consumption rises
What did he work under at Royal Commissions?
Income Tax
What are externalities?
An indirect cost or benefit to an uninvolved third party that arises as an effect of another party's activity.
(External costs)
When the government introduces a subsidy to the consumers....
The demand for that prodcut increases therefore shifting the demand curve.
What theory of Pigou's was proved with the Great Depression?
The Pigou Effect
Firms employ more workers to meet growing demand...
Employment grows
What did Pigou win while at University?
Chancellor's Gold Medal
Give an example of an externality.
A factory that pollutes the environment creates a cost to society, but those costs are not priced into the final good it produces.
The subsidy encourages consumers to buy more solar panels but....
Keeps the price the same for the producer.
When was the Theory of Unemployment published.
1933
The Pigou effect is also known as the..
"real balance effect."