According to the perception of Macroeconomics, it can be assumed that the negative expansion is attributed as the price that the third party bears as a cause of the transaction economically (Wray, 2015). To consider the method of transaction in this Economics Essay the customers and the manufacturers both can be considered as the third and the second party respectively. While considering this concept it can be stated that the manufacturers and the customers are considered as being the second and the first party that do not provide the third party any type of allowance to the parties or the individuals that remain outside of the market. Considering negative inflation in accordance to Mariappanadar negative expansion can be considered as the spill over effect. It can be taken into consideration that due to this effect the marginal social cost (MSC) becomes higher than the marginal private cost when negative expansion is taken into consideration. It can be understood that the private cost is felt by the customers as well it can be experienced by the producer too, but the society can experience marginal cost since society is counted as the third party (Uribe & Schmitt-Grohé, 2017). The social cost and the private cost can be explained as the summation of the external cost. Therefore, it can be understood that the consequences that arise due to over production or through the market failure that can be said as inflation shall not be taken as the record of the producers in their opinion.
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Figure 1: Negative externality (Source: Created by Author)
Considering the above stated diagram in this Economics Essay it can be understood that the curve MSC outstrips the curve of PMC while considering the negative expansion. It can be taken into consideration that the negative expansion happens during the time when the firm makes opinion rather than providing the whole cost of the decision making (Stock & Watson, 2018). Thus the community suffers the welfare net loss which is signified as the triangle ABC in the diagram stated above. In order to stop the adverse impact over the third party or over the community the government of the countries should try to interfere for making a help in the price. Every countries government can use two kinds of alternatives that are
First one is that governments can file lawsuits that can be regulated or the penalisation of the producers can be done.
Second one is that the governments can maintain a solution of optimal market. The government for reducing the impact of negative inflation can order atmosphere taxation. Therefore, it can be said that through the government intervention two kinds of incidents can be gained by the government and that are as
First one is that the economy can be able to fix the damage which occurs because of the negative expansion (Stiglitz, 2018).
Second one is that the economy will be able to increase the financial cost over the marginal social cost.
So it will not be wrong to say that the community welfare can be gained through the help of intervention of the government.
According to the discussion stated above in this Economics Essay, in order to prevent the consequences of the negative inflation over the economy the intervention of government has a powerful influence on the society (Reis, 2018). In order to prevent the impacts of negative inflation over the society, the government normally penalises pigovian taxation over the producer’s activities. According to the pigovian taxation discussed above in this Economics Essay the rate of tax is imposed for dealing to the situation such as the over production. It can be said that the government is able to equivalent the marginal private cost and also the marginal social cost. Thus after the tax is imposed the producers get bound for minimising the production quantity in order to maintain the cost of operation in the business (Quadrini & Ríos-Rull, 2015). Thus it helps the economy for going towards a healthy equilibrium.
Figure 2: Pigovian taxation (Source: Created by Author)
According to the above stated figure in this Economics Essay, it can be observed that the taxation imposition has helped in the shifting up of marginal private cost curve towards the upward direction, that becomes equivalent to the inflation and amount (Piazzesi & Schneider, 2016). Through the help of the taxation imposition the government is able to prevent the percentage of negative inflation on the production of per unit. To count in a nutshell the pigovian taxation demoralizes the actions that are being charged as a cost of net production over the third party who remain on the society.
The pollution of air in India can be said as a serious issue that has been expanding in the form of epidemic with the increasing time. From the last 30years the private organisations and firms are increased across India and thus have been expanding to be one of the popular origins of the industrial hub. The rapid growth rate of the industrialisation has severe effect on the environment. Continuously destruction of the forests and the trees have been expanding and thus the ecological balance of the nation have been degraded. It is seen that over the years the level of pollution of the country has been going to a higher rate especially the carbon dioxide emission in the air has been increasing (Nakamura & Steinsson, 2018). Apart from the industrial rapid growth the level of carbon dioxide in the air has been increased by the large amount of vehicles that are added in the society. To talk about the big cities like Kolkata, Delhi, Mumbai and Bangalore the air pollution rate is very high. These things have a direct effect over the society. This pollution of air affects the respiratory system of the people directly. Thus it can be stated that the third party might be suffering through the cardiovascular effect or from the disease of asthma. It will not be wrong to say the though industrialisation provides employment path and increase the economy of a country. But with the increase in the production level of the companies the carbon dioxide into the air will also be increased. Industrialisation also in a way will dump the noxious chemicals from the manufacturing firms to the water and the land. Because of industrialisation the greenhouse gas is also emitted into the air and the level has been rising. According to Koster and Droes, the pollution of land would lead in the loosing up of the ecological balance. Since India is a country that has too many farming land then the land pollution may lead to the reduction of the cropland quality. Thus it can be seen that with the industrialisation the growth rate and the economy position of India is increased but with industrialisation the level of pollution is also increased by a good mark (Johnson, 2017). Thus due to the increased level of pollution the community which is considered as the third party has been suffering a lot and also the balance of the environment is lost due to this pollution.