Answer to Question #155651 in Economics for bhavishya

Question

The Indian government plans on promoting electric vehicles in the country. The government has proposed two policies:(i)Impose tax on the manufacturers of electric cars.(ii)Buyers are given tax exemption for financing conventional cars.A.Considering market for electric cars, do you feel that the policy supports the objectives? Address the question using the following scenarios. Use demand-supply framework.a.(1Marks)Explain the impact of policy (i) on equilibrium quantity and price. (Draw a diagram to support your answer)b.(1Marks)Explain the impact of policy (ii) on equilibrium quantity and price. (Draw a diagram to support your answer)c.(3Marks)Explain the impact of both policies (i) & (ii) on equilibrium quantity and price. (Draw diagrams to support your answer)B.Considering market for conventional fuel cars, do you feel that the policy supports the objectives? Address the question using the following scenarios. Use demand-supply framework.d.(1Marks)Explain the impact of policy (i) on equilibrium quantity and price. (Draw a diagram to support your answer)e.(1Marks)Explain the impact of policy (ii) on equilibrium quantity and price. (Draw a diagram to support your answer)f.(3 Marks)Explain the impact of both policies (i) & (ii) on equilibrium quantity and price. (Draw diagramsto support your answer

Answer 1

(i) Impose tax on the manufacturers of electric cars.

(ii) Buyers are given tax exemption for financing conventional cars.

A. Considering market for electric cars, if the Indian government plans on promoting electric vehicles in the country, I feel that the both policies doesn't support the objectives.

a. The policy (i) will decrease supply of electric cars, so equilibrium quantity will decrease and price will increase.

b. The policy (ii) will decrease demand for electric cars, so equilibrium quantity and price will decrease.

c. The impact of both policies (i) & (ii) will definitely decrease equilibrium quantity but the impact on the price is uncertain.

B. Considering market for conventional fuel cars, if the Indian government plans on promoting electric vehicles in the country, I feel that the both policies doesn't support the objectives.

d. The policy (i) will not have impact on equilibrium quantity and price.

e. The policy (ii) will increase demand for electric cars, so equilibrium quantity and price will increase.

f. The impact of both policies (i) & (ii) will increase equilibrium quantity and price.