The government taxes high-smoke heating systems and subsidises low-smoke systems. Which combined effect is most likely if households respond to the price incentives?
Demand for high-smoke systems falls, demand for low-smoke systems rises and external costs decrease
Demand for high-smoke systems falls, demand for low-smoke systems rises and external costs increase
Demand for high-smoke systems rises, demand for low-smoke systems falls and external costs decrease
Demand for high-smoke systems rises, demand for low-smoke systems falls and external costs increase
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.