Read the passge and answer the questions below: There is considerable evidence that some consumers are willing to pay more for green goods. Green goods are goods that are manufactured in an environmentally friendly way (e.g. wood products from sustainable forests, electricity produced from wind power) without a direct impact on a consumer. These are referred to as impure Public goods – a package of Private good and Public good.     Why consumers are willing to pay more for these goods is complex. Whatever the reason, it is clear some consumers are willing to pay for green actions that do... Show more

Read the passge and answer the questions below:

There is considerable evidence that some consumers are willing to pay more for green goods. Green goods are goods that are manufactured in an environmentally friendly way (e.g. wood products from sustainable forests, electricity produced from wind power) without a direct impact on a consumer. These are referred to as impure Public goods – a package of Private good and Public good.    
Why consumers are willing to pay more for these goods is complex. Whatever the reason, it is clear some consumers are willing to pay for green actions that do not benefit them directly.    
One example of green goods is 'green electricity'. Green power is simply electricity produced using renewable sources of energy. Of course, electricity itself is completely indistinguishable from non-green electricity. There are two ways in which consumers may buy green electricity; either by buying it directly or by contributing to the cost of building green electricity capacity.    
Consumers are clearly willing to spend more for green electricity and their preference for green production is indicated by the recent rise in popularity of retail carbon offsets. Offsets of emissions have long been used by firms to buy and sell the obligation to reduce emissions. In the USA, new emitters setting up a business in an urban area have to 'offset' their emission additions by finding (and paying) existing firms to reduce their emissions. In recent years, firms have used offsets to effectively reduce their emissions in order to provide a green image, particularly in the case of carbon emissions.    
The purchase of offsets by consumers is different when consumers buy offsets. They are making a purely voluntary contribution to the environment. Retail offsets are a way in which consumers can produce a green product from a brown product. For example, one can make his part of the flight carbon neutral by paying someone else to reduce his or her carbon emission. This is formalized in an offset market  - Whereby sellers of offsets reduce emissions and then sell these 'reductions'.

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