Assessment 2 (Research Essay) - Due: Week 7 Friday (31 Aug XXXXXXXXXX:00 pm AEST Note: no submissions including automatically submitted by Moodle will be reverted to the draft after the due date. This...

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Introduction
In economics, Externality is the cost or effects on the party which is not liable for such a cost or penalty, i.e its cost likely to arise more to a third party who is affected by the decisions of others in terms of costs or benefits (Ahlfeldt, 2015).
In this paper, we would be discussing meaning, of the externalities, steps to curb the negative externalities and the government steps to ensure to deal with such externality. In this paper, we have discussed the negative externality of air pollution in the developing countries and its serious repercussion effects (Acharya, 2017). And this draft will discuss the negative externalities of the air pollution in India. Let’s begin with an explanation of related concepts of negative externalities that will be explained by using a current scenario about the air pollution in one of the populated country India. We will discuss some common measures or steps taken by governments or government authorities to deal with negative externalities so that a recommendation is finally made to deal with the severe problem of air pollution in the country India. Towards the end, we have drawn a proper conclusion regarding this (Bellver-Domingo, 2016).
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In this scenario, the third party is the party which doesn't involve in the activities directly. The externalities can be divided into 2 parts.
1. Negative externality, it occurs when the third party or the party which is not concerned directly pays for the undue cost. For example, Air pollution can be one of the negative externality. If a truck on the road exhale gases which are hazardous for people so it may cause illnesses to the people, the affected people would pay for the hospital and medical charges. And these charges are the negative externalities which might be barred by the general public (Colander, 2016).
In the below figure, external cost occurs when social cost is greater than the private cost
2. Positive externalities, In this scenario the third party or the party which is not concerned directly gets the benefit from the externalities. For example, Education is the positive externalities because students get information and learn knowledge from education. Once they get graduated, they are expert in terms of subject knowledge and specialized in the area where needed for a particular job to perform (Crifo, 2015).
In the below figure, when social cost is more than private cost, the external benefit is said to exist then it is a positive externality.
Externalities cost people barred in when there is a difference in private cost and social cost.
1. Private cost: It is the cost to an individual who is a consumer or firm who finally consume (Eggertsson, 2016).
2. Social cost: It is the cost that not only the individual barred, but this cost is for the rest of the society.
Negative Externality Analysis
According to the media, the air pollution in India is taking a serious issue that needs to be dealt with on an immediate basis (Gilead, 2017). In the manner big Asian cities that are developing fast, their air quality is depreciating rapidly. Emissions and gases from the chemical industry, motor pollution and the burning of the fossil fuels or coal face up the environment in a difficult situation. The NOx gas level in India has increased drastically, compared with the previous year. The PM10 level also gets doubled. Various dangerous tiny particles present in the air are over 10 times. This type of unbearable situation causes negative externalities. One of the newspaper reported that Indian news dailies are filled with articles about asthma, small children’s are admitting in clinics, various epidemics are there in the country due to pollution. By seeing the research figures it shows that Delhi smog kills more than 11000 people a year it is all due to the smog that trigger heart or asthma attacks and which may cause cancer in some cases (Greiner, 2016).
Negative externalities, like the respiratory diseases which may cause by the air pollution it may lead to market failure. It is a situation in which participants of the market cannot distribute goods and services effectively. There might be many reasons for such a situation where the market failure occurs, and negative externalities could be taken as one of the reasons. It might be the other party of the company or someone from the industry pays for the external cost of the product (Harris, 2017). There could be a condition where some of the prices of the products will cost lower than the cost of it. In return, this will create the distribution problem in the market. Till then the government gives a proper measure to deal with the problem, the more big problem will come into the picture.
After extensive research and going through various theories of various economist we found three methods to deal with negative externalities in such kind of Scenarios, which are
1. Taxation and Subsidies
2. Regulation
3. Permit
Government Steps to reduce the negative Externality
Taxation and Subsidies. Taxation means that government or tax department will levy a simple tax on the polluters who pollute the environment in excess even they exceed the prescribed amount declared by pollution department it may increase their prime cost and give guidelines to the firms which will limit their pollution level and can exhaust pollution in the prescribed amount (Hoffmann, 2017). Air pollution majorly comes from the industrial areas, motor vehicles, burning of fuels like coal, diesel and list are endless. For this, the taxation can be taken as a controlling measure to control these pollutions effective. Government at times levy different taxes on pollutants, such as the emission tax, coal fuel tax, motor exhaust emission tax, carbon tax and like it. This shows that how can taxation deal with so many kinds of pollution. Due to the tax, companies will be bind to buy the less polluting equipment or otherwise change production techniques so that it will decline the amount of pollution. Also, various offers and schemes should be introduced so that people opt for less polluting techniques of production, and which further polluters will create a low level of negative externalities which would make a good amount of incentive people who help to decline their pollutants as by those polluters who make a lower level of negative externalities. Also, government authorities should give some subventions to the factories which help to reduce the emission of harmful gases. In such a manner, that the externalities of the air pollution could be resolved efficiently...