Economic management — Question 95

Answer
Prioritise the identified network bottleneck, with equity safeguards and staged construction.

Working
The subsidy produces more immediate spending but only 2% additional capacity by Year 4; network investment produces 12%, six times the forecast gain at equal public cost (Source 1). Near-capacity installers and connection limits mean additional demand can raise costs without proportionate supply (Source 2). The network option better addresses the binding constraint and can reduce outages and peak-generation emissions (Source 4). Its construction demand and imported inputs still create near-term pressures and leakage, while its three-year lag delays price benefits. Source 3 limits the equity of purchase subsidies; renters may obtain more broad benefits from reliable system capacity. Sustainable development requires considering environmental construction costs and useful lifetime, not only the spending total. Stage the project and support access where justified; do not promise an immediate fall in every bill.

Marking criteria

• Uses spending, equal costs and the 6:1 capacity comparison. [3 marks]
• Explains demand bottlenecks and productive-capacity mechanisms. [4 marks]
• Integrates access and distribution evidence. [3 marks]
• Evaluates price stability and environmental outcomes across time. [4 marks]
• Justifies priority and an appropriate complementary design. [4 marks]
• Acknowledges delivery/import/forecast uncertainty. [2 marks]