Why I chose this topic: During the externalities unit in microeconomics, I became interested in how taxes and subsidies work. The different ways in which the government intervened in the market seems fascinating. The topic of EVs and the EVIP came up and I thought to myself about how this incentive program functions and if it is successful. I was curious and took the time to research it and I found out that it does not function the way a normal subsidy would work. Thus I planned on making it my topic when I do my extended essay. Approach: I will be looking at the theory at how subsidies affect the supply and demand of a firm. However, this incentive program does not follow the way most subsidies do. This is due to the fact that the …show more content…
Vehicles with a 12 month lease term will receive 33% of the incentive, 24 month lease term receives 66% of the incentive and leased vehicles with a 36 month or longer term will receive the full incentive. EVIP applicants are also eligible for the electric vehicle charging incentive program (EVCIP). This program allows up to $1000 on rebates on charging station that are installed within homes. Thus, buyers are essentially saving thousands of dollars with the help of these incentive programs Theory: Sales and Demand: Before the EVIP was introduced, the sales of EVs were suffering. Ontario had counted less than 100 EVs on the roads before the incentive was introduced. Consequently, the government had to think of a solution or else dealerships that sell these vehicles would stop as there is little to no demand. Thus, the EVIP was created to create attraction to these vehicles. While this program still had to be improved upon, it did not fail. Sales of EVs went from less than 100 in 2010 to about 750 in 2014. That is about an increase of 750% throughout the span of 4 years. In addition, the sales then went up to about 1300 EVs in 2016. In order to determine how this government subsidy will affect the demand and supply of EVs, their elasticity of demand and supply must be determined. From Graph 1, it can be seen that demand is elastic and supply is
In chapter one, Levitt talks about incentives and how it's an important role in economics. This is something most of us learn at some point in our lives if not at a very young age.
They explained that: “Changes in incentives influence human behavior in predictable ways”. The main point of this concept is that the more attractive an option is the more likely an individual to choose it. Another point that they also focused on was the fact that if a particular product more costly, the more unappealing it will become to the consumer. They used examples such as employees will worker harder if they feel that they will be greatly rewarded or a student will study material that they feel will be on an
5. Incentives matter. Explain why businesses and entrepreneurs are more likely to voluntarily undertake the projects that consumers value highly relative to price and less likely to undertake the government-sponsored projects in which the per-unit cost of production is above the price consumers willingly
subsidies; which are grants of money that are given to the Canadian agricultural markets and
Everyone around the country needs to work to lower emissions into the air to reduce the greenhouse gases trapping heat in the atmosphere. I am not a fan of electric vehicles but, they are better for the environment than gas or diesel vehicles. They release less gases into the air and can be recharged almost anywhere with solar panel charger adapters. Some companies like, Tesla and VIA (General Motors Company) have made a dream for a person to own and be able to afford one.
Eligibility for subsidies must first approve of task they must undertake to receive it, and understand the purpose of such funding and not to misuse it. That being said, if extra funding is received, it shall not go directly to the community but to those that are recording the history. It may then, consequently leave the community or circulate within it. As well if surplus funds are given, a boost in quality or quantity of documentation is expected. Values of the subsidies are subjected to change, although not at market particular communities must have value. Secondly, legitimacy of one's
When explaining economics instead of using large over-complicated words, the authors simply state that “economics is, at root, the study of incentives.” Rather than utilizing economist argot, Levitt and Dubner describe economics in a way that makes it easier to understand and put into perspective. As the passage continues, the authors provide the audience with many relatable examples such as “if you break curfew you are grounded.” People respond to incentives, it’s the way our society works, “an incentive is simply a means of urging people to do more of a good thing and less of a bad thing.” Like Levitt and Dubner previously stated, economics is the study of incentives and how it affects society and their decision making
From the e-Activity, compare the components of the incentive type of contract mentioned in the article that you read against the incentive contracting types referenced in Chapter 5 of your text. Expand on the difference(s) that you have found and give your opinion as to which component makes more sense
Firstly, our example illustrates how people respond to incentive. In economics, an incentive is defined as any factor that provides a motive for a particular course of action. This example is exemplified in our first customer. Perhaps, the promotion encourages her to purchase an extra bottle of X shampoo now instead of later. By doing so, the BOGO 1.5 promotion can be classified as an incentive which ensures her decision. As she rationalizes her decision to purchase an extra shampoo, she demonstrates that everyone do respond to incentives. In contrast, the promotion does not have the effect on the second consumer because it does not provide incentive therefore not applicable to him and his choice as a consumer.
Across the world and for years governments have promoted the usage, production, and purchasing of electric vehicles. The first big push for electric vehicles was in 1998 in the state of California with the mandate that stated, “ a small percentage of vehicles sold after 2000 [ must have] zero emissions”( Baumgartner et Gross 35). This pushed many small and large vehicle companies to begin to look towards producing hybrid and electric vehicles. Another big push for electric vehicles in the United States was in 2005 when soon to be President Barack Obama advocated that” the United States [would] have one million electric vehicles on the road by 2015” (Barkenbus 56). Despite this goal never being met, without a doubt it promoted and furthered electric vehicles. Outside of North America in Europe, electric vehicle incentive is also prominent. Writing in October of 2000, Jack Barkenbus states “France is likely to be at the forefront of advocating electrical vehicle usage because of [their] nuclear power” (Baumgartner et Gross 35). This prediction was correct France now offers recharging services for electric vehicle owners. Another European country offering an incentive for purchasing electric vehicles is Switzerland. “Switzerland rewards individuals who take part in [electric vehicle promotion] by offering direct subsidies when buying a car”(Baumgartner et Gross 36). All of this incentive and promotion has been worthwhile, writing in 2017 Jack Barkenbus states that, “thirty percent of all new cars sold in the last quarter of
As of 2013, Tesla owned 43% of the market share of electric vehicles in Canada (EVWORLD, 2013) and the market is expected to continue to grow, as sustainable energy becomes more of a way of life than a movement. According to the Government of Canada, “the market for electric vehicles in Canada is growing as Canadians look for cleaner, more efficient vehicles. Research confirms that consumers in North America are willing to pay more for an electric vehicle if the environmental benefits are significant” (Government of Canada, 2010). With this expedited increase in purchases of electric vehicles, the Tesla Model S is positioned well to obtain its goal of increasing its existing market share.
One of the main political factors facing Tesla in the US are the incentives offered by different states and cities to Tesla owners. They must co-ordinate with these policy makers and inform the consumer. In China, the key political factor is that “the Chinese government wants to put around 5 million electric or plug-in hybrid vehicles on its roads by 2020, but to date reports have confirmed that there are a mere 70,000 electric vehicles plying on China’s roads. In order to promote EV sales, the government has set a target that 30% of government vehicles purchased by 2016 should be EVs. To reach the target set for 2020, the Chinese government is ready to fund nearly $16 billion to build electric charging stations. To further promote EVs among Chinese car buyers, the government is looking to impose a new tax on gasoline engines and has renewed the private-buyer subsidies for electric-powered vehicles for another three years.” (GuruFocus. 2014.
In order to protect less competitive domestic automobile producers, the government offers subsidies to them. It makes the domestic automobile producers feel that cost is reduced and
As we can see from the Figure 1, point A is the market equilibrium point where the supply curve, S_0 intersect the demand curve, D_0. When the market is equilibrium, the market equilibrium price is at P_0, while the market quantity demanded is at〖 Q〗_0. When government grants subsidy on a firm, it causes the supply curve of the firm to move outward or shift to the right because the firm’s costs that needed to be paid are reduced. This means that greater quantity can be supplied at each price. The new market equilibrium price and new market quantity demanded will then be formed and there will be a new market equilibrium point which is point B. There is a fall in market equilibrium price, which is from P_0 to P_1 and rise in the quantity demanded which is from 〖 Q〗_0 to〖 Q〗_1. Grants of subsidy will always lower the equilibrium price, fall in the market price and increase the quantity demanded at the same
According to online Oxford Dictionary, subsidy is a sum of money allocated by the government or state with the intention to help industries to keep their commodity’s prices low [1]. On the other hand, subsidy rationalization is an initiative where the government would slowly and properly increases the prices of subsidized items such as fuel energy and food to save cost [2]. In Malaysia, items for example, natural gases and sugar have been subsidized by the government for over a few decades ago. Malaysian government volunteered to give subsidy is because they want to help Malaysian people to live an easier life. These subsidies could provide a better living for Malaysian people is because with the help of these subsidies, people in Malaysia pay lesser than they supposed to pay and therefore, enabling them to save a lot of money in long run. It is a good news for Malaysia’s citizens to hear about the implementation of subsidies but for Malaysian government, it is the other way round. These subsidies which Malaysian government provides are considered as expenditures for Malaysia and it leaves a significant effect in Malaysia’s national budget. Besides, these subsidies also affect Malaysia’s fiscal deficit and increasing its national debt. In order to provide Malaysia a better future, an immediate and effective plan needs to be carried out such as rationalising the subsidies in Malaysia.