Extract 1: CleanHeat programme Domestic wood-burning stoves create local smoke pollution. The government proposes an emissions tax on polluting fuel and a subsidy for low-emission heating systems.
| Policy information | Amount |
|---|---|
| Tax on polluting fuel | 18p per unit |
| Subsidy on low-emission system | £700 |
| Households near pollution limit | 240,000 |
Explain why smoke from stoves can be a negative externality.
State two government policies other than taxation that can address externalities.
Analyse how the £700 subsidy may increase consumption of low-emission heating.
State two possible benefits of reducing smoke pollution.
Explain one opportunity cost of the subsidy.
Evaluate whether the tax is likely to be more effective than the subsidy.
31 exam-style questions on OCR GCSE Economics 3.8 Limitations of markets, covering 3.8.1 Positive and negative externalities, 3.8.2 Policies to correct externalities, 3.8.3 Impact of externality policies, and 3.8.4 Costs and benefits of externality policies. Each one has a worked solution and a mark scheme showing where the marks go.