Manufacturers in Lydon lose £140 million of output each year because the electricity network cannot meet their needs. Current business investment is £1,900 million a year.
The government can implement only one of the following policies. The money could otherwise be used to modernise hospitals.
| Policy | Estimated cost to the government over five years | Forecast annual effect | Time before effects are expected to begin |
|---|---|---|---|
| Upgrade the electricity network | £520 million | Output lost due to the network falls by £120 million | Five years |
| Reduce the tax on business profits | £520 million in lost tax revenue | Business investment rises by £95 million | One year |
Using the information provided, evaluate whether the government should upgrade the electricity network rather than reduce the tax on business profits.
121 exam-style questions on OCR GCSE Economics 3.7 Supply side policies, covering 3.7.1 What are supply side policies and 3.7.2 Costs and benefits of supply side policies. Each one has a worked solution and a mark scheme showing where the marks go.