Friday, March 13, 2015

Teaching the Elasticity Concept - Traffic Fines Based on Income

Adjusting the size of penalties and fines to income sends the same price signal to everyone.  This system is not only fair, it makes economic sense given that the purpose of a system of fines and penalties is to create socially accepted deterrents for reducing socially unacceptable behavior.  Using a sliding scale for the fine takes into account the inelasticity of demand for those who are wealthy. 


Most of Scandinavia determines fines based on income. Could such a system work in the U.S.?

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