A local authority is considering a programme to fit loft insulation in 2,000 homes. Table 1 gives the estimated total costs and benefits over five years.
| Estimate | Value over five years |
|---|---|
| Private benefits to households from lower energy bills | £3.2 million |
| External benefits from lower national energy demand and emissions | £1.1 million |
| Private costs of fitting and administering the programme | £2.5 million |
| External costs of noise and traffic affecting other residents during installation | £0.3 million |
Calculate the estimated net social benefit of the programme over five years. Show your working.
Analyse how the local authority's home-insulation programme could affect the allocation of resources. Use Table 1 and your answer to part (a).
83 exam-style questions on AQA GCSE Economics 1.6 Market failure, covering 1.6.1a Market failure as misallocation of resources, 1.6.1b Government intervention, 1.6.2a Defining externalities, and 1.6.2b Positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.