Economics: Automobile and Subsidy Essay

Economics Assessment
What policy would the government use to increase the demand for electric cars?
The government can use different policies to achieve objectives. If the government want to increase the demand for electric cars, they may use taxes and charges as well as subsidies if the first policy does not work. A subsidy is a contribution from the government towards something that has positive outcomes. An example of a subsidy is if the government pay half of the fees for creating bus passes, so the bus passes are offered to the public for cheaper as they have a decreased cost. If the government wants to increase demand for electric cars, they may use a subsidy. The government could contribute towards the cost of creating electric cars so they can be sold to the public for less money. If the electric cars are cheaper because the company has received a subsidy, more people will want the electric cars which will increase demand for them. If more people are buying electric cars, there will be a reduction in pollution. When people use normal cars, it pollutes the atmosphere, leading to global warming. If more people are using electric cars instead of petrol or diesel ones, there will be less pollution because the electric cars do not pollute. However, if the government is giving the company a subsidy for each car that it creates they will be losing a lot of money. Electric cars may or may not cost a lot to produce, but if the demand for them increases the company will have to start making a lot more; the government will then have to pay a lot more because they want the electric cars to be cheaper for the public so the demand for the cars will increase. This is a disadvantage because the government is going to have to pay a lot of money to cover the electric cars’ costs so they may have less money to spend on other necessary things. If the government would like to improve the health system or really needed more new machines for the National Health Service, the government will not be able to afford it. This may then lead to an increase in taxes for the public because the government will need to make up the money they lost on the cars for important things such as public and health services. As a result of this action, the people who have high paid jobs and skills may begin to get lower paid jobs because it may not be worth it for them to be working for so much money when most of it is being taxed.
Another way the government can increase demand for electric cars is by using taxes and charges. If the government put higher taxes on petrol and diesel, this will discourage people from using it. Alternatively, they may buy an electric car where there is no need for the petrol or diesel so they will see this as the cheaper option. Using taxes and charges is a better way for the government to increase demand for electric cars because it does not cost them a lot of money and they will also achieve their objectives as people will be discouraged from buying petrol/diesel cars.

What policies could be used to encourage the use of public transport?
The government will want to encourage the use of public services because it pollutes the atmosphere less. If more people are driving their own cars around instead of using the public transport services, it will cause more pollution because each car causes pollution and if there is more cars, there will be more pollution as well as congestion.

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