The article link below is about a proposal to increase the Tax Credit for people who elected to purchase an Electric car. The thinking is this will in effect make buying one less expensive and, at the margin, people would purchase more of them.
The suggestion is the market fails to supply enough of this type of car at a low enough price.
A subsidy, in this case at tax credit for buyers, is one way to correct for the "externality".
Electric cars tax credit should rise to $10,000, says Congressman:
Electric cars: New legislation would increase the tax credit for the purchase of electric vehicles from $7,500 up to $10,000 as a way to make it easier for people to buy electric cars.
Here are my series of slides that illustrate how this might work AND how it is not as simple or effective as it is intended to be. Things never are in Economics!
What do you think? Constructive comments or corrections are welcome. Feel fee to steal.