• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Evaluate the argument for government intervention in the market for solar panels to encourage the growth of renewable energy rather than allowing free market forces to operate. (10)

Extracts from this document...

Introduction

Evaluate the argument for government intervention in the market for solar panels to encourage the growth of renewable energy rather than allowing free market forces to operate. (10) The energy market is one that is usually regarded as relatively inelastic; for a developed country it is largely assumed that every household in the country will consume some form of energy. A free market economy would allow private firms to operate as they wish without government intervention, and as these firms usually operate through the use of standard fossil fuels rather than the newer more sustainable energy sources. Government intervention would therefore ensure that these firms will ?play ball?, or forced to comply with regulation laws. ...read more.

Middle

The subsidy would therefore provide an incentive for households to switch as government intervention creates a downward pressure on prices, which are still the main deciding factor for households deciding which energy firm to use. Another positive effect of government intervention in this sector is the economic side benefits it would bring; the case study argues that by subsidising the solar market the UK would likely be able to supply ?15% of UK electricity demand?, and by doing so at the same time ?supporting almost 50,000 jobs?. Clearly there is also some economic incentive for the government to continue subsidising the solar panel market; it creates a benefit for households as well as the economy as a whole. ...read more.

Conclusion

An evaluative point that can be made on this case is the extent of popularity the solar panel market will be met with. To switch to a more renewable energy source, consumers must face the costs of switching and shopping around, and therefore may have little incentive to switch from existing sources which already work perfectly fine. Therefore the incentive for switching will fall to the extent of the subsidy governments are willing to invest into the market. If the government does intervene but does not provide enough monetary support, it is unlikely to have any effect on the market at all as it would still be too costly to provide an incentive to switch; at the same time there would also be a huge opportunity cost as the government places money into the market with little effect ? funds that could be better spent elsewhere. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Peer reviewed

    Outline the argument for and against smoking ban

    4 star(s)

    The MSC is higher than the MPC because if someone smokes a packet of cigarettes a day at �5 a pack for 20 years, they will spend on average �36,500 in cigarettes.

  2. Explain why environmental pollution is regarded as a source of market failure? Evaluate three ...

    The permits would then be allocated to individual firms or polluters. The permits are then trade-able for money between polluters. The advantage of this being that firms, which succeed in reducing their emission can then sell their permits to other firms/polluters.

  1. Explain the meaning and significance of externalities, how they arise and to what extent ...

    Government responses to negative externalities generally include rules, negotiations or legal enforcement of property rights, taxes and subsidies, internalization and assignment of property rights and creation of a market.

  2. Micro economics environment - Government intervention

    But today you do find that some are in the hands of the private sector. Large scale investment Production that requires massive investment with little or no returns would not new undertaken by the private sector. The question of equity Because the private sector has its aim of profit maximisation

  1. Whatever economic system a country adopts, there is always a role for the government ...

    An optimal decision can never be made as it is impossible for the consumers to obtain adequate or perfect information. In this connection, governments in developed countries have to step in to enact legislation to protect consumers. Increasing Returns to scale Increasing returns to scale arise when a balanced increase

  2. Case study of Singapore E-Government.

    2.2 Government to Business (G2B) For the business community, transacting online with the Government is now becoming the norm. Having easy and convenient online access to government agencies at all times means savings in time and money for the businesses.

  1. Using the data and your economic knowledge, evaluate the economic case for and against ...

    In this way, a higher petrol tax could be effective in enlarging the size of the market for electric cars, with the additional benefit of generating increased tax revenue for the government. It may turn out that the consumers would be less sensitive to petrol price increases at times when

  2. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    They might lose the competitive edge in the market and suffer a long term decline in market share and profitability. The prevailing strategy for both firms is probably to go ahead with research and development spending. If they do not and the other firm does, then their profits fall and they will lose market share.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work