6.03 - How Do Externalities Affect You?

Consider all possible solutions or alternatives.
Give three possible solutions to the environmental issue you are investigating.
•Euthanasia
•Shelters having weekly adoption fairs
•Those who spay/neuter pets receive tax break from government.

Why would some people oppose to the solutions you have chosen?
•People would oppose to euthanasia because of the belief that killing is wrong in every sense.
•Shelters usually mean neglect to most people.
•The tax break would be unfair to breeders, who cannot spay or neuter their pets.

Calculate the consequences of these solutions—both intended and unintended at all levels of the economy.
What positive or negative externalities does this issue present at each sector of the economy? Refer to your circular flow diagram.
•Government
A. Euthanasia: Positive Externality: money flow would increase due to more people paying for euthanizing of their animals
B. Shelters: Negative Externality: the government would then have to organize and regulate said shelters, fairs, etc.
C. Tax Break: Negative Externality: tax money would be lessened to provide services for people.
•Household
A. Euthanasia: Negative Externality: people’s moral compass would seriously affect their decision in participating in this solution
B. Shelters: Positive Externality: more choices for pets
C. Tax Break: Positive Externality: people would get more money
•Business Firms
A. Euthanasia: Positive Externality: businesses that produce things such as phenobarbital would benefit from the increased business; Negative Externality: businesses for pets would decrease in sales if the pets were being killed
B. Shelters: Positive Externality: Shelters would have more people visiting
C. Tax Break: Positive Externality: more money would be available to flow through all businesses
•Rest of the World
A. Euthanasia: Positive Externality: countries involved in the trade of chemicals and sedatives would benefit from the increased use of phenobarbital
B. Shelters: Positive Externality: people from other countries could also visit and adopt pets
C. Tax Break: Positive Externality: this could cause more interaction with the U.S. Government in terms of borrowing money

What incentives do individuals, businesses, and government have to act on each possible solution?
•Individuals
A. Individuals would feel better about euthanasia if they knew that the animals would be more at peace with the procedure done.
B. Shelter fairs would mean more options of animals for families to adopt as pets.
C. Who doesn’t want more money? :)
•Businesses
A. Certain businesses can benefit from the euthanasia itself, but others can benefit from the family’s money that is now unused, that would have been used on pet care before.
B. Businesses that cater to pets’ needs can benefit from people adopting from shelters.
C. All businesses will benefit from the increase in money flow if people get tax breaks.
•Government
A. This could increase trade between other countries that have the ability to produce phenobarbital and other drugs that will be used to euthanize pets.
B. Shelter regulation, if done well, can better the government in the people’s eyes.
C. The government can use the opportunity to raise sales tax, gaining back the money they gave away.

What are the externalities, both positive and negative that could result from each possible solution?
A. The solution of euthanasia could affect all levels positively by freeing up money in the household, therefore allowing businesses to prosper, causing the government to get more money in turn, meaning the rest of the world can benefit from the government’s increase in money through trade.
B. The solution of shelters means that families will be more likely to adopt pets, therefore businesses will possibly falter economically since the money is now mostly going to pet stores. This means the government will have to rely more strongly on pet supplies, and they will import and export more pet-related goods with the rest of the world.
C. The solution of a tax break would result in the household having more money to spend with the businesses, but the government could still be hurting by giving out so much money. This means that the trade with other countries (aka the rest of the world) could result in more massive debt for the government, which means they would have to raise taxes anyway.

6.01 - Circular Flow Diagram

A. Government spends money on phenobarbital, anesthesia, etc.
B. The government borrows money to fund research on chemicals such as phenobarbital and anesthesia, to use on animals.
C. The government regulates ways to euthanize pets, requirements for taking care of pets, and such.
D. Taxes are raised to provide for government services relating to animals, such as adoption centers.
E. Income from G is put in savings accounts, which can be accessed to buy stocks in phenobarbital.
F. Pet owners visit the veterinarians, pet stores, etc. for products for their pets, and spend their money there.
G. Income from people’s jobs (such as veterinarians) go to their families.
H. People need to access things such as animal food, phenobarbital, etc., as well as the services of having their pet spayed or neutered.
I. Certain businesses can provide a home for the stray animals.
J. There is a market for phenobarbital.
K. Veterinarians have a need for products to take care of animals, and must buy them.
L. Businesses provide the service to animals such as physicals and spaying/neutering, walking the pets, and cleaning after them; they provide goods such as medication for animals, administer vaccines and shots, and also can provide food and toys.
M. Companies may take out loans, or also issue stocks for purchase, increasing the amount of money they can spend on providing services for pets.
N. We can export metal and chemicals to other countries, to help them control their animal population.
O. People worldwide can buy stock in several products that help with the animal population, such as chemicals, metal, and food.
P. We can import things such as food, phenobarbital, etc. Also, some people bring animals into this country from others.
Q. We can borrow money to take care of the needs for stray animals, or buy stock in companies from other countries.

6.01 - Economic Relationships

Define the situation or problem.
There are a great number of animals that have no homes, left to wander the streets to fend for themselves. Being animals, they will reproduce, bringing about more homeless animals. These strays can affect every single part of our lives.

Construct a circular-flow diagram that incorporates effects of your chosen issue on economic products and various sectors of the economy.
Because of strays, the following parts of our economy may be affected:
·Households/Local Resident - possible injuries, property destruction, and contamination from waste; otherwise, more options for pets
·Area Businesses - strays may make their "homes" under and around businesses, causing fowl odors and messes that could be bad for businesses
·Government - every year, millions of tax dollars are spent on either care for these strays, or ways of destroying them
·The Rest of the World - the United States is not the only country that has to deal with overpopulation of animals; also, other countries can trade with the United States for products to help anesthetize or even euthanize animals.
·Resources - animals have the ability to damage natural resources, such as Florida's orange groves
·Goods and Services: this does mean that veterinarians can get more business fixing animals or putting them to sleep
·Finances: money may be borrowed for companies to buy products with which to deal with stray animals or unwanted pets


Sites Used
·http://www.humanesociety.org/issues/pet_overpopulation/