2020 IB Extended Essays

Introduction With the current world mindset of clean energy, governments and in particular, the Australian

government have been subsidising the sale of solar panels with the intention of enticing the average

consumer to buy them. This essay will take an in-depth look at whether these subsides increase the

sales of solar panels in the Australian market from the year the subsidy was introduced in 2009 to up

until 2019. It will explore the economic theory behind a subsidy, and what it does to the consumers

and producers as well as the loss of production. The subsidy was introduced in 2009, with the

incentive of inspiring Australian consumers to install solar panels in order to meet the Australian

renewable energy target. Since the subsidy was introduced, the dollar quantity of the subsidy per

kW has slowly been scaled back due to a lack of funding and commitment from the federal

government.

Methodology The research conducted in this essay was both primary and secondary, with the primary data being

conducted using the sampling technique of convenience sampling. This was done because it best fits

the requirements of the data needed as well as the target audience (Homeowners with solar panels

installed after 2009). The secondary data was found on Australian websites to ensure that the data

used from there was relevant, as well as only using reputable sources to ensure the data was

accurate. Along with the secondary data that was gathered, economic textbooks were read in order

to gain a deeper understanding of subsidies and how they affect consumers, produces and the

community

Economic Theory The economic theory central to answering this question is subsidy. A subsidy as defined by the

Oxford Economics Course Companion is an amount of money paid to a firm per unit of output. This

means that the Australian government is paying money to the suppliers of solar panels with the

intention of cutting costs for the firm and reducing the sale price for consumers. This money is used

instead of the firm’s money, allowing the firm to cut the sales price in order to maintain the same

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