Question

What could a government do to increase the demand for wind-generated electricity?

Answer 1

Answer:

The easiest way for the government to increase demand for wind-generated electricity is to subsidize this type of energy.

Explanation:

The subsidy would be either given to firms so that they can lower the price, or to consumers, so that they can use the subsidy to purchase the wind electricity at the market price. In either case, the subsidy would lower the price of wind-generated electricity for consumers, increasing demand accordingly.

This subsidy would be justified because wind-generated electricity represents a positive externality that is not always accounted for in the market price (hence why it is an externality), and the positive externality is that wind-generated electricity is a clean source of energy that does not contribute to climate change, and that does not cause any air pollution.