Question

What is a corrective tax? Why do we need them? What are the results of a corrective tax? (Please explain your answer by drawing a graph)

Answer 1

It can be mentioned that corrective tax is nothing but attacks option used by the government in order to correct the negative externalities. we need corrective tax because it helps us to reduce the impact of negative externalities so that the market failure caused by the negative externalities can be reduced on the whole. the results of corrective the exercise that the impact of negative externalities reduced and for instance when there is pollution acting as a negative externality the impact is reduced to the corrective tax as shown in the graph and the supply shift left so that failure is corrected.