Do you think the government should subsidise the purchase of electric

cars

A subsidy is a certain amount of money the government gives a firm to produce goods and services

The government could subsidise in the purchase of electric cars because it will reduce negative
externalities (which are third party effects which include external costs and social costs) such as
pollution mainly because, if the firm gains more money from subsidies it will invest in its 4 factors of
production such as enterprise by advertising so more people will be able to see these electric cars
and it will increase the demand for electric cars since advertising is a factor that would affect demand
and if you increase it then the demand will increase so this would potentially reduce the demand for
petrol cars. On the UK government website there is a transport and environment statistics page, and
it states that the largest emitting sector of greenhouse gas emissions is transport, and the UK is
producing 26% of the total emissions. If we don’t subsidise and encourage the purchase of electric
vehicles, then the pollution will keep increasing causing more greenhouse gases going into the
atmosphere and causing global warming which is a major drawback for economies and the UK will
not be able gain supply due to the temperature changing which reduces harvested crops in farms so
there will be an excess in demand due to less supply. The advantage of having electric cars is that
they don’t use fossil fuels therefore they wont emit greenhouse gases so it will be environmentally
friendly.

Another reason why the government could subsidise in electric cars is that it will create jobs for
people because if the government encourages the growth of the electric car market then firms will
be able to increase their factors of production and the they will definitely increase labour by
investing in capital goods such as machinery and if they get machinery it will need to be managed by
workers so firms can hire more people leading to more jobs and an increase productivity as well as a
decrease in unemployment and right now the unemployment rate is 4.4% according to the office of
national statistics which can lead to positive externalities such as less strain on the government
because they won’t have to hand out benefits so this reduces the opportunity cost because then the
government can spend its revenue elsewhere such as healthcare and education which will help keep
the population healthy and increase their skills and knowledge so they can use it to increase output
in the electric car market.

However the downsides of subsidising in electric cars comes with opportunity costs such as spending
on more important things such as healthcare and education and if they do subsidise electric cars
president Biden has quadrupled the tariffs on them so they would be very expensive to buy so then
the demand for these cars would decrease as there are cheaper options such as diesel and petrol
cars and this would cause a negative externality because there would be an under consumption of
electric cars and an over consumption of non electric cars leading to more C02 emissions causing
more global warming and influencing the fall in supply because there would be weather changes this
is not the only problem either. If the Government did subsidise the electric car market then their
expenses would increase drastically causing a budget deficit. This would become a huge problem for
the UK economy mainly because it’s a consumer nation and it produces less goods and services, it
only specialises in financial services and pharmaceuticals. So by subsidizing the electric car market
they will lose a lot of money when they could be spending it on other things that will improve the
economy quicker because them subsidizing the car market is a long term benefit but it comes with
short-term costs.

Another problem with subsidizing the electric car market is that if it becomes successful then the
demand for diesel and petrol will decrease so the industry may potentially be shut down due to it
being very harmful to the environment but then the UK’s government revenue will decrease because
they wont be able to gain much in taxation. According to my car credit 49% of the taxation is petrol
and diesel in 2023 so this is a huge amount and if the industry shuts down then the UK economy is
losing out in 49% of its tax revenue and not only are losing there income, structural unemployment
will become inevitable. This will lead to an increase in government spending on benefits and as they
won’t have as much in come they will fall deep into a big budget deficit and they don’t have that
many goods and services they can export either.