Frida and Brent, Two Economists Working on Public Policy, Are

question 38

Essay

Frida and Brent, two economists working on public policy, are discussing a compensation scheme to accompany the introduction of a new carbon tax.The scheme compensates households by giving them just enough money to put them back on the same indifference curve they were on before the introduction of the tax."This compensation scheme is pointless," proclaims Brent."If we put consumers back on the same indifference curve, they will purchase the same bundle of goods they did before and we won't achieve any reduction in carbon emissions."
"Nah, you're so wrong," argues Frida, "what matters is the relative prices of the goods.As long as they are different we can still lower carbon emissions"
Is Frida or Brent correct? Explain your reasoning.

---

Definitions:

Fertilization

Fusion of two gametes to form a zygote; part of sexual reproduction.

Amniotic Fluid

The protective fluid contained within the amniotic sac that surrounds and cushions the fetus during pregnancy.

Mechanical Impacts

Physical interferences or forces that result in a change to an object's state or structure.

Seminiferous Tubules

In testes, tiny tubes where sperm form.