Problem
Consider a society in which most people use gasoline or diesel fuels for their cars.
i. Explain the reason why the use of electric cars is recognized as generating positive externalities.
ii. Draw a graph and show the effect of the government policy to promote the use of electric cars, which is to give subsidies to buyers of electric cars. Clearly show how the socially desirable quantity of electric cars are purchased in the market as a result of the government policy.
iii. Newspapers report that many countries will ban the sale of non-electric cars that use gasoline or diesel by 2030 or 2035. Draw a graph and show how this future government policy can achieve the desirable quantity of electric cars that are purchased in the market.