A Report On Emission In Negative Externality And Price Elasticity Of Demand Of Petroleum

A REPORT ON EMISSION IN NEGATIVE EXTERNALITY AND PRICE ELASTICITY OF DEMAND OF PETROLEUM

Prepared for:

Heng Kiat Sing

Course Leader of ECO MBA

Submitted: 6th Nov 2006

Prepared by:

Liu Yi (IBMS/0607/009)

EXECUTIVE SUMMARY

This report was authorized by the request of ECO5005 Economic of the Business Environment course leader, Heng Kiat Sing. This is to enable student to have a clear understanding on Externality, and Price Elastic, thus, enable to analyze price elasticity of demand of problem.

In the first section of this report, it mentioned concept of Global warming as well as Global warming. At second section, it leads into the explanation of Market failure, negative externality; it follows by price elasticity introduction and price elastic of demand in the 3rd section. At last, it conclude that emission which is negative externality to create global warming, furthermore, base on price elasticity of demand definition and calculation, it conclude Price Eelasticity of petroleum demand and petroleum Tax imposition.

TABLE OF CONTENTS

Page Executive Summary i

1. Introduction

1.1. Authorization 1

1.2. Limitation 1

1.3. Scope of Report: 1

2. The body

2.1. Global warming 2

2.1.1. Global warming overview 2

2.1.2. Global warming affect 2

2.1.3. Emission 4

2.2. Market failure 4

2.2.1. Market failure introduction 4

2.2.2. Types of market failure 5

2.2.3. Externality 5

2.2.4. Implication 6

2.2.5. Externalities in supply and demand 8

2.2.6. Negative Externality 8

2.2.6.1. Negative Externality in consumption 10

2.2.6.2. Negative Externality in production 11

2.3. Price Elasticity 12

2.3.1. Price Elasticity introduction 12

2.3.2. Price Elasticity of Demand 12

2.3.3. Elasticity and Taxation Revenue 13

3. Conclusion 15

List of reference 16

1. Introduction

1.1. Authorization:

This report was being generated by the request of ECO 5005 Economic of the Business Environment course leader, Heng Kiat Sing. This is to enable student to have a clear understanding on Economics of Business Environment, thus, enable to anlyze negative externality and price elasticity of demand of problem.

1.2. Limitation:

Some difficulties were being encountered when producing this report which it had affected this report to be not perfectly remarkable. Such as imperfect information obtained from internet and Textbook which are related to Tax.

1.3. Scope of Report:

In the first section of this report, it mentioned concept of Global warming as well as Global warming. At second section, it leads into the explanation of Market failure, negative externality; it follows by price elasticity introduction and price elastic of demand in the 3rd section. At last, it conclude that emission which is negative externality to create global warming, furthermore, base on price elasticity of demand definition and calculation, it conclude Price Eelasticity of petroleum demand and petroleum Tax imposition.

2. Body

2.1. Global warming

2.1.1. Global warming overview

The progressive gradual rise of the earth's surface temperature thought to be caused by the greenhouse effect and responsible for changes in global climate patterns. An increase in the near surface temperature of the Earth. Global warming has occurred in the distant past as the result of natural influences, but the term is most often used to refer to the warming predicted to occur as a result of increased emissions of greenhouse gases. (http://weather.ncbuy.com/glossary.html?action=LETTER&term=G, accessed on 4th Oct 2006.)

The world is undoubtedly warming. This warming is largely the result of emissions of carbon dioxide and other greenhouse gases from human activities including industrial processes, fossil fuel combustion, and changes in land use, such as deforestation. Continuation of historical trends of greenhouse gas emissions will result in additional warming over the 21st century, with current projections of a global increase of 2.5Ð'Ñ"F to 10.4Ð'Ñ"F by 2100, with warming in the U.S. expected to be even higher. This warming will have real consequences for the United States and the world, for with that warming will also come additional sea-level rise that will gradually inundate coastal areas, changes in precipitation patterns, increased risk of droughts and floods, threats to biodiversity, and a number of potential challenges for public