1.3.2 Externalities and Government Intervention (Edexcel A-Level Economics Teaching PowerPoint)

This teaching powerpoint covers Externalities and Government Intervention

The government can use a range of tools to correct for externalities. In the case of negative externalities, such as pollution, the government can use regulations or taxes to discourage the activity that causes the negative effects. For example, the government could impose a tax on polluting firms, which would make it more expensive for them to pollute and would encourage them to reduce their pollution. On the other hand, the government can also use subsidies to encourage activities that generate positive externalities. For example, the government could offer subsidies to firms that engage in R&D, which would encourage more innovation.