• 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...


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.


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.


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 UK government has a self-imposed target of reducing carbon dioxide emissions to 20%, below the levels in the 1990's, by they year 2010. In order to meet this self-imposing target the government will have to implement policies, which reduce the carbon dioxide emissions.

  1. Is the Government to Blame for Higher Petrol Prices?

    Determinants of Demand for Petrol (Short Run) Global Economic Demand for Oil Increasing in China The major factor affecting demand led rises in Petrol Prices in the Short Run (2001 onwards) and likely to be increasingly in the long run is the rapid Economic Growth of the sleeping giant economy which is China.

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

    Monopoly Perfect competition in a market arises when there is a sufficient number of firms or degree of rivalry such that no one firm can affect the price of that good. Imperfect competition, on the other hand, is a serious deviation from perfect competition.

  1. Micro economics environment - Government intervention

    the health services law and order. For purpose of strategic spending Certain industries e.g. nuclear energy or naval dockyards may be considered to be too important to be left under private control. This was a post war argument for nationalist of basic industries.

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

    At the least though, cigarette smoke does bother non-smokers when smoking occurs in public enclosed areas. Taken from http://www.spea.indiana.edu/kenricha/Classes/V625/Lecture%204/Lecture_4.htm * Positive consumption externalities occur when consumption has a beneficial effect in other markets in the economy. Most examples of positive consumption externalities involve some type of aesthetic effect.

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

    However, there are only a limited number of rights available to be won and if all of the leading firms in a market spend on research and development; this may ultimately bring a lower rate of return. The big question is why don't the firms collude and agree together what

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

    The downturn may be only part of the business cycle, but those rendered unemployed are likely to suffer from dwindling skill levels if their human capital is not in day-to-day use. There are potentially serious equity considerations, and the plight of those made unemployed ________________ deserves consideration.

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