ECS3704
ASSIGNMENT 1 (SEMESTER 2)
DUE DATE: August 2024
Written Assignment Submission Guidelines:
Please ensure that your assignment is submitted electronically through the myUnisa platform no
later than …August 2024. Kindly note that fax or email submissions will not be accepted.
NB: Assignment submitted to the lecturer(s) through email will not be considered.
QUESTION 1
ANSWER:
Analysis of Government Intervention in Pollution Created by Steel Production
1. Market Failure Due to Externalities
Steel production often leads to significant pollution, including air and water contamination. This
pollution is a classic example of a negative externality, where the social cost of production exceeds
the private cost. In a free market, firms producing steel might ignore the external costs (e.g., health
issues, environmental degradation) that their pollution imposes on society. This leads to
overproduction of steel and more pollution than is socially optimal.
Diagram Explanation (CHOOSE ONLY ONE FROM THE TWO PROVIDED DIAGRAMS)
To illustrate this concept, we can use a basic supply and demand diagram:
• X-axis: Quantity of Steel Produced
• Y-axis: Price/Cost
ASSIGNMENT 1 (SEMESTER 2)
DUE DATE: August 2024
Written Assignment Submission Guidelines:
Please ensure that your assignment is submitted electronically through the myUnisa platform no
later than …August 2024. Kindly note that fax or email submissions will not be accepted.
NB: Assignment submitted to the lecturer(s) through email will not be considered.
QUESTION 1
ANSWER:
Analysis of Government Intervention in Pollution Created by Steel Production
1. Market Failure Due to Externalities
Steel production often leads to significant pollution, including air and water contamination. This
pollution is a classic example of a negative externality, where the social cost of production exceeds
the private cost. In a free market, firms producing steel might ignore the external costs (e.g., health
issues, environmental degradation) that their pollution imposes on society. This leads to
overproduction of steel and more pollution than is socially optimal.
Diagram Explanation (CHOOSE ONLY ONE FROM THE TWO PROVIDED DIAGRAMS)
To illustrate this concept, we can use a basic supply and demand diagram:
• X-axis: Quantity of Steel Produced
• Y-axis: Price/Cost
