1.

a) Suppose the country is a net importer of energy (like the UK). Explain why the rise in energy prices will make the country, on average, worse off? b)Are there groups within the UK that are likely to be better-off because of the rise in energy prices.

c) In the lecture I outlined the argument that if you want to help consumers facing a rise in prices, it is better to give them a cash grant than to subsidise the price. But suppose the cash grant cannot be targeted and must be the same for everyone. Explain why this may make some households better-off and others worse-off.

d) If all countries subsidise the domestic use of energy explain why this is likely to benefit, in part, the overseas producers of energy. e) What policies would you recommend to deal with the energy crisis?