Residential solar panel installations provide significant advantages that extend far beyond the households that install them. When a homeowner invests in solar panels, they reduce their reliance on fossil-fuel power stations, lowering carbon emissions and improving local air quality. Economists highlight that without government subsidies, the free market underallocates resources to renewable energy because homeowners only consider their private benefits, ignoring the wider social benefit (line 8) of cleaner air, reduced greenhouse gases, and enhanced grid stability.
Source: environmental economics review
Define the term ‘social benefit’ (Extract E, line 8).
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.